📋 2025/26 Class 4 NI Rates
Lower Rate (6%): On profits between £12,570 and £50,270
Upper Rate (2%): On profits above £50,270
Class 2 NI: Abolished from 6 April 2024 — no longer payable
What Changed? Class 2 NI Abolished
From 6 April 2024, HMRC abolished Class 2 National Insurance. Previously, self-employed workers paid a flat weekly Class 2 charge (£3.45/week in 2023/24) in addition to Class 4. This flat charge is gone. For the 2025/26 tax year, self-employed drivers pay only Class 4 NI.
This is largely good news for lower-earning drivers, as the flat Class 2 charge disproportionately affected those with modest profits.
Class 4 NI: How It's Calculated
Class 4 NI is calculated on your net taxable profit (gross income minus allowable expenses including mileage relief) — not on your gross income. This is an important distinction.
The thresholds for 2025/26:
| Profit Band | Rate |
|---|---|
| Up to £12,570 (Lower Profits Limit) | 0% — no NI |
| £12,571 to £50,270 | 6% |
| Above £50,270 | 2% |
Worked Example
A taxi driver with a net taxable profit of £28,000:
| Calculation | Amount |
|---|---|
| Profit in Class 4 band (£28,000 − £12,570) | £15,430 |
| Class 4 NI at 6% | £925.80 |
| Total Class 4 NI | £925.80 |
Does Class 4 NI Count Towards Your State Pension?
This is a common question, and the answer is: not directly. Class 4 NI does not build State Pension entitlement. However, for 2025/26, HMRC has introduced a system where self-employed workers with profits above the Small Profits Threshold (£6,725) receive a National Insurance credit towards their State Pension automatically — even though they no longer pay the old Class 2 charge.
If your profits are below £6,725, you will not receive these credits automatically. In that case, you may wish to pay voluntary Class 3 NI contributions (£17.45/week in 2025/26) to protect your State Pension entitlement. Consult HMRC's Check Your State Pension service at gov.uk/check-state-pension.
Class 4 NI vs Income Tax: What's the Difference?
Both Income Tax and Class 4 NI are calculated on your taxable profit, and both are paid via Self Assessment. The key differences are:
- Income Tax funds general government spending. Class 4 NI was originally ring-fenced for social security but no longer is in practice.
- Class 4 NI is only paid by self-employed people on their trading profits. Employed workers pay Class 1 NI instead (deducted via PAYE).
- Both use the same £12,570 personal allowance / Lower Profits Limit threshold.
Impact of Mileage Relief on Class 4 NI
Because Class 4 NI is calculated on your net profit after expenses, claiming your full HMRC mileage allowance significantly reduces your NI bill as well as your income tax. A driver claiming £5,000 in mileage relief saves not just income tax but also up to £300 in Class 4 NI (£5,000 × 6%).
See Your Class 4 NI Calculation
Our free calculator shows you exactly how much Class 4 NI you owe alongside your income tax — with a step-by-step breakdown of the calculation.
Open Free Tax Calculator →Frequently Asked Questions
Do I pay Class 4 NI if my profits are below the personal allowance?
No. Class 4 NI only applies on profits above £12,570 (the Lower Profits Limit for 2025/26). If your net profit is below this threshold, you pay no Class 4 NI and no income tax.
I work part of the year as employed and part as self-employed. How does NI work?
You pay Class 1 NI on your employment earnings (through PAYE) and Class 4 NI on your self-employment profits (through Self Assessment). There are rules to prevent you from overpaying NI in total — HMRC applies a maximum NI calculation if you have both Class 1 and Class 4 contributions in the same year.
Is Class 4 NI deductible as a business expense?
No. Class 4 NI is not an allowable business expense for Self Assessment purposes. It is a personal tax liability, not a trading cost.