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, Pension contributions are not deducted here: a personal pension operates on relief at source, so the contribution extends your basic-rate band rather than reducing your taxable profit.

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 (relief at source, which is how personal pensions work).

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.

Sources

Rates and rules in this article are taken from the official pages below. Figures were checked against these sources at the last review date shown above; always confirm against the source before acting.