Self-employed tax calculator 2026/27
Enter your annual profit as a sole trader or self-employed worker to calculate your income tax, Class 4 National Insurance, and total tax bill for 2026/27.
Enter profit after deducting allowable business expenses from your turnover.
Estimated take-home profit
£29,168
£2,431/month · Effective rate: 16.7%
Note: Class 2 NI (£3.45/week) may also apply if profit exceeds £12,570. Payment on account may affect your actual cash flow. Figures are estimates — consult an accountant for your return.
How self-employed tax works in the UK
As a self-employed sole trader in the UK, you pay income tax and National Insurance on your annual profit — not on your turnover. Profit is calculated by subtracting allowable business expenses from your total business income. You report this through a Self Assessment tax return each year, with the deadline of 31 January following the end of the tax year.
Unlike employed workers who pay tax monthly through PAYE, self-employed people pay their tax in lump sums. In your first year of self-employment you pay a balancing payment. From the second year onwards, you typically make two payments on account (advance payments towards the following year's tax bill) ) in January and July.
Class 4 National Insurance 2026/27
Self-employed workers pay Class 4 National Insurance on their profits. Class 4 is different from the employee NI (Class 1) paid by PAYE workers — the rates are lower, but they work differently:
| Annual profit | Class 4 NI rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 to £50,270 | 6% |
| Over £50,270 | 2% |
In addition, Class 2 NI applies at £3.45 per week if your profits are above £12,570. This adds approximately £179 per year and is included in your Self Assessment tax bill. Class 2 NI also counts towards your State Pension entitlement.
What counts as an allowable expense
Allowable business expenses reduce your taxable profit. Common examples for sole traders include:
- Office costs: stationery, printer ink, software subscriptions
- Travel: business mileage (at HMRC's approved mileage rates), train fares, parking )
- Stock, raw materials and tools used in the business
- Marketing costs: advertising, website hosting
- Professional fees: accountant, solicitor, insurance
- Business premises costs: rent, rates, utilities (or a proportion for home offices)
- Staff costs if you employ others
Personal expenses — even those that overlap with work, such as a mobile phone — can only be claimed for the business-use proportion. HMRC scrutinises mixed-use claims closely. Keeping detailed records is essential.
Payment on account explained
Once your Self Assessment tax bill exceeds £1,000, HMRC requires you to make advance payments towards the following year's bill. These are called "payments on account":
- First payment on account — 50% of last year's tax bill, due 31 January
- Second payment on account — the remaining 50%, due 31 July
- Balancing payment — any shortfall (or refund if you overpaid), due 31 January the following year
This means in your second year of self-employment, you may face a very large January bill: the balancing payment for the year just ended plus the first payment on account for the current year. This catches many new self-employed people off guard — setting aside approximately 25–30% of your monthly profit for tax throughout the year is a reliable way to avoid the shock.
Frequently asked questions
Do I need to register for Self Assessment?
Yes. If you are self-employed and earn more than £1,000 from self-employment in a tax year (the trading allowance), you must register with HMRC for Self Assessment. You should register by 5 October following the end of the tax year in which you started self-employment.
What is the trading allowance?
The trading allowance is £1,000 per tax year. If your total self-employed income (turnover, not profit) is below £1,000, you do not need to report it to HMRC at all. Above that, you must register and file a return.
Is self-employment more or less tax-efficient than being employed?
It depends. Self-employed workers pay Class 4 NI at 6% (versus 8% for employed workers) on profits between £12,570 and £50,270. However, self-employed workers do not benefit from employer pension contributions, statutory sick pay, or employer NI being paid on their behalf. The ability to claim business expenses provides a significant advantage if you have legitimate costs to offset.
Should I become a limited company instead of a sole trader?
It depends on your profit level and risk tolerance. At lower profits (under approximately £40,000–£50,000), sole trader status is usually simpler with minimal tax difference. At higher profit levels, operating through a limited company and extracting income as a salary and dividends combination may reduce the overall tax and NI burden. Limited companies also provide limited liability protection. Speak to an accountant before making the decision.