Tax8 May 2026

Self-Assessment 2026/27: How Class 2 and Class 4 NI Work for the Self-Employed

If you're self-employed in the UK, your tax bill has two main parts: income tax on your profits, and National Insurance — Class 2 and Class 4. Both NI classes changed in the last two years, and the 2026/27 picture is now meaningfully different from what older guides describe.

This post walks through how Class 2 and Class 4 NI work now, the income tax on top, the payment-on-account schedule, and how to estimate your bill before HMRC sends one.

Use the Self-Assessment Calculator to estimate your 2026/27 bill end-to-end.

The key numbers for 2026/27

Personal Allowance: £12,570. Income tax bands (rUK): 20% to £50,270, 40% to £125,140, 45% above. Class 4 NI: 6% from £12,570 to £50,270 of profits, 2% above. Class 2 NI: no mandatory payment for profits over £7,105. Voluntary at £3.65/week if profits are below that. Self-Assessment filing deadlines: 31 October 2026 (paper) and 31 January 2027 (online) for the 2025/26 tax year. For 2026/27, those become 31 October 2027 and 31 January 2028.

Scotland: income tax bands differ (Starter 19% / Basic 20% / Intermediate 21% / Higher 42% / Advanced 45% / Top 48%) but Class 2 and Class 4 NI are UK-wide.

Class 4 NI: 6%, not 9%

Class 4 NI dropped from 9% to 6% in April 2024. It has stayed at 6% for 2025/26 and remains at 6% in 2026/27. This is one of the most important changes for the self-employed in recent years — and one of the easiest to miss because plenty of accountancy blogs and older HMRC PDFs still quote the old 9% figure.

The mechanics are:

  • 0% on profits up to £12,570 (the lower profits limit, aligned with the Personal Allowance).
  • 6% on profits between £12,570 and £50,270.
  • 2% on profits above £50,270.

So if your self-employment profits for 2026/27 are £40,000:

  • Class 4 NI is charged on £40,000 − £12,570 = £27,430.
  • At 6%, that's £1,645.80.

If your profits are £80,000:

  • £50,270 − £12,570 = £37,700 at 6% = £2,262.
  • £80,000 − £50,270 = £29,730 at 2% = £594.60.
  • Total Class 4 NI: £2,856.60.

This sits on top of income tax. For the £40,000 profits example: income tax of (£40,000 − £12,570) × 20% = £5,486, plus Class 4 NI of £1,645.80 = £7,131.80 total.

Class 2 NI: no longer mandatory above the threshold

Until April 2024, Class 2 NI was a flat weekly payment (~£3.45/week) that everyone with self-employed profits above a small earnings limit had to pay. From April 2024, that mandatory payment was abolished for anyone with profits above £6,725. For 2026/27, the equivalent figure is £7,105.

You still get credited with NI qualifying years (which matter for the State Pension) — that hasn't changed. What changed is that you don't have to actually hand over the £3.45/£3.65 a week to do so. The system credits the year automatically when profits exceed the threshold.

Where Class 2 still matters:

  • Profits below £7,105 (or trading losses). If you want to keep building your State Pension entitlement, you can pay Class 2 NI voluntarily at £3.65/week (£189.80/year for 2026/27). This is cheap protection against gaps in your NI record. The alternative — Class 3 voluntary contributions — costs around £18 a week, several times more expensive. Pay Class 2 voluntarily where you qualify.
  • The first year of trading. If you only traded for part of the year and your profits are low, voluntary Class 2 is usually worth paying to secure that NI year.

You opt into voluntary Class 2 via the Self-Assessment form (box 36 on page SEF4 of the self-employment supplementary pages). Simple but easy to overlook.

Income tax on your profits

The Personal Allowance is £12,570 for 2026/27. Profits above that are taxed at:

  • 20% basic to a total income of £50,270.
  • 40% higher between £50,270 and £125,140.
  • 45% additional above £125,140.

"Profits" for income tax purposes means your turnover less allowable expenses, less capital allowances, less any pension contributions if you're using net pay arrangements (rare for the self-employed).

Two trade-offs to flag for sole traders:

1. The Personal Allowance taper between £100,000 and £125,140. Above £100,000 of total income, your Personal Allowance is reduced by £1 for every £2 of income, hitting zero at £125,140. This produces a 60% marginal income tax rate in that band, plus 2% Class 4 NI = 62% marginal. Pension contributions are particularly valuable here, because they extend your basic-rate band and reduce your adjusted net income for the taper calculation.

2. The HICBC range (£60,000 to £80,000). If anyone in your household claims Child Benefit, the High Income Child Benefit Charge starts at £60,000 of adjusted net income and fully recovers the benefit by £80,000. See the HICBC Calculator.

When you actually pay HMRC: the payment-on-account schedule

This is the part most new sole traders find confusing. You don't just pay your 2026/27 tax bill in one go after the year ends. You pay it in three instalments, two of which fall during the tax year itself.

For a profitable year that follows another profitable year, the schedule looks like this:

  • 31 January 2027: balancing payment for 2025/26 + first payment on account for 2026/27 (50% of 2025/26's bill).
  • 31 July 2027: second payment on account for 2026/27 (the other 50%).
  • 31 January 2028: balancing payment for 2026/27 (any difference between actual bill and the two payments on account) + first payment on account for 2027/28.

The first time you're profitable enough to trigger payments on account, the January bill is effectively 150% of one year's tax. That double whammy is the source of many "I've been hit with a huge tax bill" complaints. It isn't a penalty — it's the system catching up on instalments that didn't exist before you crossed the threshold.

You're required to make payments on account if your prior-year tax bill (income tax + Class 4 NI, less PAYE deducted at source) exceeded £1,000, and less than 80% of your total tax was collected via PAYE.

A complete worked example

Sole trader, England, 2026/27. Turnover £85,000, allowable expenses £15,000, profits £70,000. No other income. £4,800 a year into a personal pension (net pay arrangement).

Adjusted net income for income tax: £70,000 − £4,800 grossed up = £70,000 − £6,000 (the gross pension contribution) = £64,000.

Actually, let's keep it simple — treat the pension as relief at source (which is the default for personal pensions). The £4,800 is paid net; HMRC tops it up to £6,000 in the pension, and you get an extra £1,200 of higher-rate relief via Self-Assessment by extending your basic-rate band.

Income tax:

  • £12,570 covered by PA: £0.
  • Basic-rate band extended from £37,700 to £43,700 (extended by the £6,000 gross pension contribution).
  • £43,700 × 20% = £8,740.
  • Remaining profits in higher-rate band: £70,000 − £12,570 − £43,700 = £13,730.
  • £13,730 × 40% = £5,492.
  • Total income tax: £14,232.

Class 4 NI:

  • £50,270 − £12,570 = £37,700 × 6% = £2,262.
  • £70,000 − £50,270 = £19,730 × 2% = £394.60.
  • Total Class 4: £2,656.60.

Total tax bill: £16,888.60 (before any payments on account already made).

The Self-Assessment Calculator handles all of this — including the Scottish bands if applicable, payments on account schedule, and the HICBC overlay.

Practical tips for 2026/27

Keep records as you go. Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) is being phased in for the self-employed and landlords. Quarterly digital reporting is mandatory from April 2026 for those with turnover above £50,000, and from April 2027 for those above £30,000. If you're in scope, you can't get away with a shoebox of receipts in January any more.

Pay your Class 2 voluntary contribution if you're below the threshold. £189.80 for a full NI year is cheap compared to the £945+ a year you'd pay for a Class 3 top-up later if you have gaps.

Watch the £50,270 inflection. Crossing it costs you 40% income tax and changes the marginal logic on pension contributions, salary sacrifice (if also employed), and timing of any one-off receipts. Spread bonus-like income across tax years where possible.

Use the trading allowance if it suits you. If your self-employment profits are under £1,000, the £1,000 trading allowance can be claimed in lieu of expenses — no need to register or file Self-Assessment at all if that's your only income.

Budget for payments on account. A useful mental model: assume one-third of your profits goes to HMRC in three roughly equal instalments. Hold that money in a separate account. The actual figure is usually less than that, but using one-third as a buffer means January won't catch you out.

The bottom line

The 2026/27 self-employment tax bill looks meaningfully different from the equivalent bill three years ago. Class 4 NI is down from 9% to 6%. Class 2 is no longer mandatory above £7,105. Income tax thresholds are unchanged (still frozen since 2021/22).

For most sole traders, the headline cost of self-employment tax has come down. The administration — quarterly MTD reporting if you're above the threshold — has gone up.

To estimate your bill end-to-end, use the Self-Assessment Calculator. For director-shareholders comparing routes, see the Limited Company vs Sole Trader Calculator.

This article is for general guidance only and is not personalised tax advice. Self-Assessment rules are detailed; for advice tailored to your circumstances speak to a qualified accountant or HMRC.

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