How self-employed tax is calculated
As a sole trader you pay tax on your profit, not your turnover. The steps are:
- Work out profit: turnover minus allowable expenses (or the £1,000 trading allowance).
- Add other income such as a salary, then subtract your Personal Allowance.
- Apply Income Tax bands to what's left.
- Add Class 4 National Insurance, calculated on your profit only.
Turnover vs profit
Turnover is everything your customers paid you. Profit is what's left after allowable expenses — and profit is what Income Tax and National Insurance are charged on. Earning £40,000 with £8,000 of costs means you're taxed on £32,000, not £40,000.
Allowable expenses and the trading allowance
Allowable expenses are costs incurred wholly and exclusively for your business. Common examples include stock and materials, business travel, office costs and phone bills, insurance, accountancy fees, and marketing. Personal spending isn't allowable, and costs used both personally and for business need to be split. Check HMRC's guidance on expenses if you're self-employed.
If your expenses are low, you can use the £1,000 trading allowance instead — but not both.
Income Tax and National Insurance
Income Tax rates (2026/27, England, Wales & NI)
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Your Personal Allowance shrinks by £1 for every £2 of adjusted net income above £100,000, and disappears entirely at £125,140.
Scotland
If you live in Scotland, your self-employed profit is taxed using Scottish bands. The Personal Allowance and its £100,000 taper are the same across the UK.
| Scottish band (2026/27) | Taxable income | Rate |
|---|---|---|
| Starter | £12,571 to £16,537 | 19% |
| Basic | £16,538 to £29,526 | 20% |
| Intermediate | £29,527 to £43,662 | 21% |
| Higher | £43,663 to £75,000 | 42% |
| Advanced | £75,001 to £125,140 | 45% |
| Top | Over £125,140 | 48% |
Class 4 and Class 2 National Insurance
Class 4 NI is 6% on profits between £12,570 and £50,270, then 2% above. Class 2 is no longer charged for most people; if your profit is under £7,105 you can pay it voluntarily (£3.65 a week) to keep building your State Pension.
How much to set aside for tax
The calculator's “put aside” figure is your estimated yearly Income Tax and NI on self-employed profit, divided by 12. Many sole traders move this into a separate savings account every time they're paid. Put a little more aside if your income is rising, because next year's payments on account are based on this year's bill.
Worked examples (2026/27, England, Wales & NI)
Profit only, no other income or pension. Figures come from the same calculation as the calculator above.
| Profit | Income Tax | Class 4 NI | Take-home | Set aside / month |
|---|---|---|---|---|
| £15,000 | £486 | £146 | £14,368 | £53 (4.2%) |
| £25,000 | £2,486 | £746 | £21,768 | £269 (12.9%) |
| £35,000 | £4,486 | £1,346 | £29,168 | £486 (16.7%) |
| £50,000 | £7,486 | £2,246 | £40,268 | £811 (19.5%) |
| £75,000 | £17,432 | £2,757 | £54,811 | £1,682 (26.9%) |
| £110,000 | £33,432 | £3,457 | £73,111 | £3,074 (33.5%) |
Read our guide: how much tax to set aside when self-employed, with worked examples by profit level.
Payments on account
If your Self Assessment bill is more than £1,000 (and less than 80% of your tax was collected at source), HMRC asks for two advance payments towards next year's bill — each half of this year's bill — due on 31 January and 31 July. In your first year this can mean paying the full year's bill plus 50% in advance on the same January date, which catches many people out. You can ask HMRC to reduce payments on account if you expect lower profits.
Worked example: with £35,000 profit and no other income, the year's bill is £5,832. In your first year you'd pay £8,748 on 31 January (the bill plus a £2,916 first payment on account) and £2,916 on 31 July. Your tax for the year is still £5,832 — the extra is next year's bill paid early. Payments on account aren't needed if 80% or more of your tax was already collected at source, for example through PAYE or CIS.
Employed and self-employed at the same time
If you have a job as well, your salary normally uses up your Personal Allowance through PAYE, so your self-employed profit is taxed from the next band up. For example, with a £30,000 salary and £10,000 profit, the extra Income Tax is £2,000 — a flat 20% — and Class 4 NI is £0 because profit is under £12,570. Class 4 is always worked out on profit alone. Add your salary under “More options” to see your own figures.
CIS subcontractors
Under the Construction Industry Scheme, contractors deduct tax from your pay and send it to HMRC. Those deductions count towards your Self Assessment bill. Enter the total from your monthly statements: the calculator takes it off what's left to pay and shows a likely refund if too much was deducted.
VAT and the £90,000 threshold
This calculator covers Income Tax and National Insurance, not VAT. VAT depends on your sales, not your profit: you must register once your taxable turnover over any rolling 12 months goes over the VAT threshold. Check where you stand with our VAT threshold calculator and registration checker.
How we calculate this
- Profit = turnover − expenses (or − trading allowance, capped at turnover). Losses are shown but loss relief isn't modelled.
- Personal pension contributions are treated as gross relief-at-source contributions: they extend your basic and higher rate bands and reduce adjusted net income for the Personal Allowance taper.
- Income Tax on profit = Income Tax on all income − Income Tax on your other income alone. Tax on other income is assumed to be paid via PAYE.
- Class 4 NI is calculated on self-employed profit only. Voluntary Class 2 applies only if selected and profit is below the small profits threshold.
- Scottish rates apply to Income Tax only if you choose Scotland. Pension contributions extend the Scottish intermediate, higher and advanced band limits, matching how relief at source works for higher rates.
- CIS deductions reduce the balance to pay and payments on account; they don't change the tax you owe. Payments on account are shown when the balance is over £1,000 and less than 80% of your Income Tax and Class 4 was collected at source.
- Not included: savings and dividend income, student loan or postgraduate loan repayments, Marriage Allowance, Blind Person's Allowance, VAT, capital allowances detail, and basis-period transition adjustments.
- Rates and thresholds for each tax year are stored separately and checked against GOV.UK.
Sources
2026/27 rates were checked against these official pages on 23 October 2026:
- GOV.UK: Income Tax rates and Personal Allowances
- GOV.UK: Income Tax in Scotland: current rates
- GOV.UK: Self-employed National Insurance rates
- GOV.UK: Trading allowance
- GOV.UK: Payments on account
- GOV.UK: Construction Industry Scheme (CIS)
Your figures stay on your device — the calculator runs in your browser. See our privacy page and how we keep figures accurate.
Last reviewed: 23 October 2026.
Frequently asked questions
How much tax should I put aside if I'm self-employed?
A common rule of thumb is 20–30% of profit, but the right amount depends on your profit and other income. Enter your figures above to see a monthly amount based on actual Income Tax and Class 4 National Insurance rates. If payments on account apply, you may need extra in your first year.
Do I pay tax on turnover or profit?
On profit. Taxable profit is your turnover minus allowable business expenses (or minus the £1,000 trading allowance, if you choose to use that instead).
What National Insurance do self-employed people pay?
Class 4 NI is 6% on profits between £12,570 and £50,270, and 2% above that. Since April 2024 Class 2 NI is no longer charged if your profits are above the small profits threshold; below it you can choose to pay voluntarily to protect your State Pension record.
How much can I earn before paying tax as a sole trader?
Most people have a Personal Allowance of £12,570, so no Income Tax is due until total taxable income passes that. If your total trading income is £1,000 or less, it's covered by the trading allowance and you may not need to tell HMRC.
When do I pay my self-employed tax?
Through Self Assessment. The online return and any balance are due by 31 January after the tax year ends. If you owe more than £1,000, HMRC usually also asks for payments on account on 31 January and 31 July.
Does the calculator work for Scotland?
Yes. Choose Scotland under “Where you live” to use the Scottish Income Tax bands (19% to 48%). National Insurance is the same across the UK, so Class 4 is unchanged.
I'm employed and self-employed. How is my tax worked out?
Your salary uses your Personal Allowance and lower bands first through PAYE, so your self-employed profit is often taxed at your next band. Enter your salary under More options and the calculator shows only the extra tax caused by your profit, which is what you need to set aside.
How does CIS tax affect what I owe?
CIS deductions taken by contractors are advance payments towards your tax bill. Enter the total deducted under More options: it reduces what's left to pay and the amount to set aside, and if it's more than your bill you may be due a refund.