Class 2 and Class 4 National Insurance for drivers

National Insurance for the self-employed is two things with one name, and the confusing part is that the one you have to pay does nothing for you and the one that does something for you is optional.

Class 4: the charge on profit

Class 4 National Insurance is 6% of your profit between £12,570 and £50,270, and 2% of anything above that. Below £12,570 there is none to pay.

It is worked out on the same profit figure as your income tax and appears on the same calculation. So a basic rate driver is paying 20% income tax and 6% Class 4 on the same slice of profit, which is the real marginal rate and is worth knowing before deciding whether an extra shift is worth doing.

Class 4 builds no entitlement to anything. Not the state pension, not contributory benefits. It is a tax.

Class 2: the one that counts

Class 2 is what buys a qualifying year towards the state pension. Compulsory Class 2 was abolished from 6 April 2024. Profits at or above the small profits threshold of £7,105 are now treated as though Class 2 had been paid, so the year is credited with no payment.

Below that threshold nothing is credited unless you choose to pay. Voluntary Class 2 costs £3.65 a week, or £189.80 for a full year.

A part-time driver, worked

A driver makes £5,800 of profit in a year. That is below £7,105, so no Class 2 is credited and no Class 4 is due. The year does not count towards their state pension unless they pay voluntary Class 2 at £189.80.

For somebody with thirty years still to work, that year matters little. For somebody with eight years left and a gap-filled record, it is one of the best returns available on that amount of money.

How it is paid

Class 4 comes out of the Self Assessment calculation and is paid with the income tax on 31 January. Voluntary Class 2 can be paid through the return as well. Neither is separate paperwork.