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As a self-employed you have to pay your National Insurance contributions yourself during your annual Self Assessment, together with any income tax you might owe.
You pay no NI contributions on the first £9,500 that you make.
You will need to pay Class 2 NI worth £159.
You will also have to pay £3,555 (9%) on your income between £9,500 and £49,000.
You only pay National Insurance for your:
For anything else, like dividends, savings interest, foreign income, etc., you don’t need to pay National Insurance, only Income Tax.
Of course, if you wish to qualify for or increase your State Pension, you can always make voluntary National Insurance contributions.
If you’re a company director, you’re probably wondering which option is better: paying yourself a salary or dividends.
The best solution is to pay yourself a minimum salary so you qualify for National Insurance credits, and the rest as dividends.
This is because for salary you’ll have to pay both the employee’s (yours) and the employer’s (your own company) NI contributions.
When you pay yourself dividends, you get an additional tax-free dividend allowance (£2,000) plus you’re exempt from additional NI contributions.
Most people in full-time jobs who only have PAYE income never have to bother with tax returns.
The only times when you need to submit a Self Assessment tax return are:
If you’re not sure which one applies to you, read our guide to who needs to file a tax return here – it’s a long list
If you don’t tell HMRC that you’re no longer self-employed, they’ll still expect you to file a Self Assessment tax return.
You’ll be fined if you don’t – even if you owe no tax at all.
The way you tell HMRC that you stopped being self-employed is by filing a tax return and specifying that it’s your last one.
HMRC has over 130 phone lines, but most of them are not relevant for everyday taxpayers.
These are the most important ones:
Figuring out how much Income Tax and National Insurance you should be paying if you’re self-employed is hard.
At TaxScouts, we do it for you online, fast, and for just £119, all in.
And we mean a few. After a couple of minutes of answering questions online we’ll have everything we need to start working on your tax return.
That’s right, you’ll be matched with a real accountant who is best suited to prepare your return. Plus, they’re on hand for questions whenever you need.
Once you’ve signed off your return, your TaxScouts accountant will file your return online with HMRC. That’s it! We told you it was simple.