⚖️ Comparison · Updated for 2026

Class 1 (employees) vs Class 2 / Class 4 (self-employed)

Side-by-side comparison, when-to-use-each guide, and instant conversion. Reviewed for 2026.

Quick answer: Class 1 NI (employees): 8% on earnings £12,570-£50,270, 2% above. Deducted by employer. Class 2 NI (self-employed): no longer compulsory; you can pay it voluntarily (£3.65/week in 2026-27) to protect your State Pension record. Class 4 (self-employed): 6% on profits £12,570-£50,270, 2% above. Both Class 2 and 4 paid via Self Assessment.
Decision guide — when to use which
Use Class 1 (employees) when…

Employed under PAYE — deducted automatically by employer on payslip.

Use Class 2 / Class 4 (self-employed) when…

Self-employed, sole trader, or partner in a business — paid via January Self Assessment.

📊 Side-by-side comparison
Aspect Class 1 (employees) Class 2 / Class 4 (self-employed)
Type Class 1 (employee) Class 2 + 4 (self-employed)
Rate 2026-27 8% up to £50,270 6% (Class 4); Class 2 voluntary (£3.65/wk)
Who pays Employer deducts it Self Assessment (January)
Pension qualifying Yes Yes (Class 2 secures state pension)
Rate above £50,270 2% 2% (Class 4)

Frequently asked

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Do I pay both Class 2 and Class 4?

Yes, if self-employed with profits above the small profits threshold (£12,570). Class 2 is now voluntary for most people but can be paid at a flat weekly rate to protect your State Pension record. Class 4 is a percentage on profit. Both are reported and paid through Self Assessment.

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How does NI compare if I'm company director?

Directors typically pay themselves a small salary (up to Class 1 threshold) plus dividends. Dividends don't attract NI. This is a key reason limited companies can be more tax-efficient above ~£40k profit.

Reviewed for 2026. This comparison is general guidance based on publicly available information. Prices, rates, rules and specifications change, so check current details with the provider or an official source before making a decision. Built by a UK-based qualified primary teacher and FA Level 2 coach as part of 247QuickTools' free utility-tools project. We don't sell SEO links or accept paid placements in this content.

Frequently asked questions

Do I pay both Class 2 and Class 4?

Yes, if self-employed with profits above the small profits threshold (£12,570). Class 2 is now voluntary for most people but can be paid at a flat weekly rate to protect your State Pension record. Class 4 is a percentage on profit. Both are reported and paid through Self Assessment.

How does NI compare if I'm company director?

Directors typically pay themselves a small salary (up to Class 1 threshold) plus dividends. Dividends don't attract NI. This is a key reason limited companies can be more tax-efficient above ~£40k profit.