Class 4 NI

[altosruleok]

Why does this have to be paid ONLY by self-employed people? It feels as though I'm being penalised for being self-employed. I understand that C2 is to do with me receiving a state pension one day, so I'm happy about that, but what does C4 cover? It feels as though I'm simply being taxed twice on the same amount of earning, and that, were I employed by somebody else, this wouldn't happen. Is this correct? Or is there something I haven't understood yet?

[mullet]

Class 4 NIC is in effect another form of taxation. It increases the overall taxation burden for the self employed to bring it more in line with employees. You won't hear HMRC admitting that!!!

[altosruleok]

Thanks, Mullet. I understand what you say, but it really seems very unfair. How can they get away with this?

[pjclar02]

Hello there

You also have to remember that if you were employed by somebody else, you would have to pay class 1 National Insurance, which is actually payable at a higher rate than class 4 National Insurance for the self-employed. So all other things being equal, if you could choose to receive £1,000 as a self-employed person or £1,000 as an employee, your net take-home pay after tax and National Insurance would be slightly higher as a self-employed person.

Hope this makes sense.

Best wishes

Paul

[altosruleok]

Thanks, Paul. That is really helpful. I'm feeling rather better about it now and may even stop whingeing!!