As self-employed you're responsible for paying your Class 2 Social Security contributions every quarter. Or every month if you pay by direct debit. From 1 October 2022 the law around Class 2 Social Security contributions changes. This will affect when you need to pay your contributions. See changes in the law on 1 October 2022 for more details.
You have 3 payment options depending on your income and circumstances:
- Reduced Rate Contributions (RRC)
- Startup Plan
- Class 2 top-up rate
Exemptions for low income
You may be entitled to an exemption from paying Class 2 contributions if your annual income is less than £19,056. Apply for Low Income Contribution Relief and find more details on contributions exceptions
if you have a low income or aren't working.
Reduced Rate Contributions (RRC)
On the RRC you pay a monthly rate calculated based on your income from 2 years ago. This means you pay your contributions up front. There'll be no future bill unless you miss a payment.
Find more details on how your rate is calculated and how to apply for the RRC.
Apply for the RRC
Anyone who's self-employed can apply to be on the RRC.
To request this rate you must:
email Social Security Contributions with 'request for RRC' in the subject title and your social security number
- attach a copy of your tax assessment from 2 years ago
- if you don't have your tax assessment from 2 years ago, tell the team in your email. They can request a copy on your behalf but this may delay the process
The Startup Plan may be a better option if:
- you're recently self-employed
- your income was significantly more 2 years ago than your expected income in your first year as self-employed
The Startup Plan
About the plan
The Startup Plan can help you pay your Class 2 Social Security contributions if you've recently started a business and your income will be lower than what you previously earned.
Instead of paying your contributions based on your income from 2 years ago, you'll pay a monthly rate based on an annual income of £19,056.
How the plan works
Rates and thresholds below are for 2022 and these change every year.
You'll pay a fixed monthly rate of £198.50. This is based on 12.5% of an annual income of £19,056.
In the recalculation of the Startup Plan, we'll use your annual income. This is the amount of income you receive between January and December, including:
- earned income from your self-employed role
- earned income from employed roles, if applicable
- unearned income, if applicable
If your annual income is:
- more than £19,056, you'll have to pay an additional 12.5% of the difference up to the standard earnings limit of £57,168. For example, if your income is £2,000 more than £19,056, you'll pay 12.5% of £2,000. You'll be billed for the difference 2 years later when your tax assessment for this period becomes available. Income between £57,168 to £260,688 has a 2.5% rate. See how your rate is calculated for more details
- between £11,616 and £19,056, you'll receive a refund. This will be sent to you 2 years later when your tax assessment for this period becomes available. This will not affect your entitlement to benefits
- less than £11,616, you'll be offered a full refund. However, this will affect your benefits. You'll need to repay any sickness benefits claimed during the year. You can choose not to claim this refund which will maintain your full entitlement to benefits
Bills and refunds
Keep full records of your income whilst you're on the Startup plan.
If your annual income is more than £19,056, you'll receive a bill in 2 years' time for you to pay the difference. We strongly advise that you plan for this.
You may receive a refund if your income is less than £19,056.
Apply for the Startup Plan
You can apply for the Startup Plan if you have:
- opened a business within the last 2 years
- not made a Startup plan application within the last 5 years
- a business licence. If you don't have one, see starting up a new business
You're allowed 2 full years on the plan. You must apply each year. If you join part way through your first year, this will not count towards your 2 full years limit.
The plan runs from January to December. However, you can apply at any time during the year.
If you decide:
- to join the plan for a second year, you must re-apply between 15 January and 28 February. If you want to pay by direct debit you must reapply by 10 February
- not to join the plan for a second year, your contribution rate for that second year will be based on your most recent tax assessment. Your rate will be calculated using the Reduced Rate Contributions (RRC)
Apply for the Startup plan
You can cancel your Startup Plan at any time by
emailing Social Security Contributions.
Once you cancelled your Startup Plan you'll:
- remain liable to pay your Class 2 contributions, even if you're going to Class 1 employment
- remain liable to pay any additional contributions owed for the period where you were paying the Startup Plan rate
- not be eligible to reapply for 5 years
Class 2 top-up rate
If you do employed and self-employed work, your contributions rate depends on your gross income received from your employer.
If your income from your employer is more than £1,016 per month:
- your contributions will be fully covered by your employer
- you'll not have to pay any extra class 2 contributions for your self-employed role
If your income from your employer is less than £1,016 per month, you may need to pay a monthly rate in addition to the contributions your employer pays.
Your overall rate will be calculated using the RRC based on your tax information from 2 years ago. We'll then deduct the amount of monthly contributions you and your employer pays and you'll need to pay the difference. This is known as the Class 2 top-up rate.
- we calculate that you should pay a rate of £300 per month
- in your employed role, you and your employer have paid £100 contributions for you per month
- your outstanding balance to pay would be £200 per month
See Reduced Rate Contributions (RRC) for more details and apply.