National insurance classes are the categories that determine how national insurance contributions are paid, based on employment status and earnings. Employees pay Class 1, the self-employed pay Class 4 and may pay Class 2, and Class 3 covers voluntary contributions.
In one line: National insurance classes group contributions by employment type, deciding who pays what and how.
How national insurance classes works
The class reflects working status. Employees pay Class 1 through PAYE, employers pay a secondary Class 1, the self-employed pay Class 4 on profits, and Class 3 lets people fill gaps in their record voluntarily.
A self-employed person with 40,000 GBP of profit pays Class 4 contributions on the slice above the threshold, reported through self assessment. Class 2 status can still matter for benefit entitlement even where the flat charge no longer applies.
Contributions build entitlement to the State Pension and certain benefits, so the class paid affects both the cost now and the record that determines future entitlement.
Class 1 vs Class 4
Class 1 is deducted from employees' wages under PAYE, with the employer also contributing. Class 4 applies to self-employed profits and is calculated and paid through self assessment.
Someone who is both employed and self-employed can pay both classes in the same year, with annual maximum rules preventing excessive total contributions across the different sources.
Primary source: GOV.UK: National Insurance
