When you're self-employed, nobody takes tax off your earnings before they reach you. You pay income tax and Class 4 National Insurance on your profit (what you earn minus allowable expenses), and you pay it yourself through Self Assessment.
This guide explains how much that is for the 2026/27 tax year (6 April 2026 to 5 April 2027), with worked examples, and when the bills fall due.
How self-employed tax works
Your tax bill is based on profit, not turnover:
- Add up your business income for the tax year
- Take off your allowable expenses
- Apply your personal allowance to what's left, together with any other income such as a salary
- Pay income tax and Class 4 National Insurance on the rest
You report all of this on your Self Assessment tax return (the SA103 self-employment pages), or, if you're in Making Tax Digital, through quarterly updates and a final declaration.
Income tax rates for 2026/27
In England, Wales and Northern Ireland:
- Personal allowance: the first £12,570 is tax-free
- Basic rate, 20%: £12,571 to £50,270
- Higher rate, 40%: £50,271 to £125,140
- Additional rate, 45%: over £125,140
The personal allowance shrinks by £1 for every £2 of income over £100,000, and is gone at £125,140. These thresholds are frozen until April 2031, so as your profits grow, more of them are taxed at higher rates.
In Scotland the personal allowance is the same, but income tax has six bands from 19% to 48%. Check the Scottish rates on GOV.UK if you live there.
National Insurance for the self-employed
Class 4
- 6% on profits between £12,570 and £50,270
- 2% on profits above £50,270
Class 4 is worked out on your return and paid with your income tax.
Class 2
You no longer pay Class 2 as a bill. If your profits are £7,105 or more, HMRC treats it as paid, so the year counts towards your State Pension at no cost.
If your profits are below £7,105, you can choose to pay voluntary Class 2 at £3.65 a week (about £190 a year) to keep your National Insurance record. It's one of the cheapest ways to protect your State Pension.
Worked examples (England, 2026/27)
Profit of £35,000
- Income tax: (£35,000 − £12,570) × 20% = £4,486
- Class 4 NI: (£35,000 − £12,570) × 6% = £1,345.80
- Total: £5,831.80, which is about 17% of profit
Profit of £60,000
- Income tax: £37,700 × 20% = £7,540, plus (£60,000 − £50,270) × 40% = £3,892, so £11,432
- Class 4 NI: £37,700 × 6% = £2,262, plus £9,730 × 2% = £194.60, so £2,456.60
- Total: £13,888.60, which is about 23% of profit
If you also have a job, your salary uses up your personal allowance and basic-rate band first, so more of your business profit is taxed at higher rates. Our take-home pay calculator helps with the salary side.
Allowable expenses: what you can deduct
Costs you have wholly and exclusively for the business reduce your profit:
- Stock, materials and goods for resale
- Tools, equipment, computers and phones (bought items usually get the annual investment allowance, so they're deducted in full)
- Business travel, vehicle running costs, or mileage at 45p a mile for the first 10,000 miles and 25p after
- Working from home: the flat rate of £10, £18 or £26 a month depending on hours worked at home, or a fair share of actual costs
- Phone, broadband and software
- Insurance, such as public liability or professional indemnity
- Accountancy fees, bank charges and advertising
- Subcontractors and staff costs
You can't deduct your own drawings, personal spending, fines, client entertaining or the income tax itself.
The £1,000 trading allowance
If your expenses are small, you can claim the £1,000 trading allowance instead of your actual costs. If your gross self-employed income is £1,000 or less, it's tax-free and you don't need to report it.
Pension contributions
Paying into a personal pension is one of the few ways to cut a self-employed tax bill legally. Your provider adds 20% basic-rate relief, and higher-rate taxpayers claim the extra relief on their tax return.
When do you pay self-employed tax?
For 2026/27:
- 31 January 2028 — file your return and pay the balancing payment
- Plus payments on account towards the next year: half on 31 January and half on 31 July
Payments on account apply if your last bill was £1,000 or more, and less than 80% of your tax was collected at source. Each payment is half of last year's bill (income tax plus Class 4).
The first-year shock: in your first January you pay the whole year's tax plus half again in advance. With the £35,000 example above, that's £5,831.80 plus £2,915.90, or £8,747.70 on one day. Set aside around 25–30% of your profit as you go so this doesn't catch you out.
Making Tax Digital is changing how you report
Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 must use Making Tax Digital for Income Tax: digital records and a quarterly update every three months. The threshold drops to £30,000 from April 2027, based on your 2025/26 return, and £20,000 from April 2028.
The tax rates don't change, and you still pay on 31 January and 31 July. But each quarterly update gives you a running estimate of your tax bill. See what MTD from April 2027 means for sole traders and every 2026/27 quarterly deadline.
Track your self-employed tax with AccLedger
AccLedger's sole trader accounting software connects to your bank, suggests categories for every transaction, and shows a live estimate of your income tax and Class 4 NI as you go. Mileage and working-from-home claims are calculated for you, and your SA103 self-employment figures come straight from your books. If you're in Making Tax Digital, it prepares each quarterly update for you to review and submit to HMRC.
The Sole Trader plan is £7.50 a month, and you can invite your accountant at no extra cost. Start a 30-day free trial — no card needed.
Frequently asked questions
How much tax do I pay when self-employed? Nothing on the first £12,570 of profit. Then 20% income tax plus 6% Class 4 NI up to £50,270, and 40% plus 2% above that. On £35,000 of profit that's about £5,830 in 2026/27.
Do I pay tax on my turnover or my profit? Your profit: income minus allowable expenses. That's why keeping receipts and records matters.
Do self-employed people pay National Insurance? Yes, Class 4 at 6% and 2% on profits above £12,570. Class 2 is treated as paid if profits are £7,105 or more, and is voluntary below that.
When is self-employed tax due? By 31 January after the end of the tax year, plus payments on account on 31 January and 31 July if your bill is £1,000 or more.
How much should I save for tax as a sole trader? Around 25–30% of your profit is a safe rule of thumb, more in your first year because of payments on account.
Can I reduce my self-employed tax bill? Claim every allowable expense, use the trading allowance if your costs are tiny, and pay into a pension. Above a certain profit, it may be worth comparing a sole trader and a limited company.
This article is general guidance based on HMRC rules for 2026/27 as of October 2026 and is not tax advice. Rates differ in Scotland.