How to Calculate Self-Employed Tax in 2026 (UK, with Worked Examples)

Working out tax when you're self-employed is three sums: your profit, the Income Tax on that profit, and Class 4 National Insurance on the same profit. This guide walks through each step for the 2026-27 tax year (6 April 2026 to 5 April 2027), the one you're earning in now during 2026. It covers the rates for England, Wales and Northern Ireland and the separate Scottish bands, what you can deduct, and how payments on account change what you actually pay and when. Every figure is checked on GOV.UK as of October 2026, with worked examples in pounds.

Quick answer

Profit = income − allowable expenses. On that profit you pay Income Tax (0% on the first £12,570, 20% to £50,270, 40% to £125,140, 45% above) plus Class 4 National Insurance (6% on profit from £12,570 to £50,270, 2% above).

• £30,000 profit (England, 2026-27): £3,486 Income Tax + £1,045.80 Class 4 = £4,531.80

• Class 2 is no longer compulsory; it's treated as paid once profit reaches £7,105

• Gross trading income of £1,000 or less is covered by the trading allowance

• Scotland uses different Income Tax bands; National Insurance is the same everywhere

Step 1: work out your taxable profit

You're taxed on profit, not turnover. GOV.UK's own example: turnover of £40,000 less £10,000 of allowable expenses leaves £30,000 of taxable profit. Money you take out of the business for yourself ("drawings") isn't an expense. It's just profit you've already paid yourself.

Allowable expenses are costs incurred for the business, including:

• office costs such as stationery and phone bills;
• travel: fuel, parking, train and bus fares;
• uniforms and protective clothing (not everyday clothes);
• staff wages and subcontractor costs;
• stock and raw materials you buy to sell on;
• insurance and bank charges;
• business premises costs: rent, heating, lighting, business rates;
• advertising and website costs, trade subscriptions and business-related training.

If something has mixed use, claim only the business share. HMRC's example: of £200 in phone bills, £70 was business calls, so you claim £70. Equipment, machinery and vehicles may be claimed through capital allowances instead, depending on your accounting method.

Simplified expenses: flat rates instead of receipts

Sole traders can use HMRC's flat rates for three costs instead of working out the real figures:

• Cars and vans: 55p a mile for the first 10,000 business miles in 2026-27 (it was 45p before 6 April 2026), then 25p a mile.
• Motorcycles: 24p a mile.
• Working from home: £10 a month for 25–50 hours a month, £18 a month for 51–100 hours and £26 a month for 101 hours or more. Phone and internet are claimed separately, at their business share.

The mileage rate rise matters. A driver doing 8,000 business miles can claim £4,400 for 2026-27, against £3,600 at the old 45p. That's £800 less profit, and £208 less tax and NI for a basic-rate payer (26% × £800). Parking and train fares go on top. But once you use flat rates for a vehicle, you must keep using them for as long as it's used in the business, and you can't use them for a vehicle you've already claimed capital allowances on.

The £1,000 trading allowance

Instead of expenses, you can deduct a flat £1,000 trading allowance. If your gross trading income for the year is £1,000 or less, it covers everything and you usually don't need to tell HMRC. Above that, you choose either the allowance or your actual expenses, not both. If your real costs are higher than £1,000, claim the costs. You can't use the allowance on income from your own company, a partnership you're connected to, or your employer.

Step 2: Income Tax on your profit

Your profit is added to any other income, such as a salary, pension or rent. Then the bands apply. For 2026-27 in England, Wales and Northern Ireland:

Wales sets its own rates, but for 2026-27 they're identical to England's. Two traps:

• Other income uses up the bands first. If you earn £20,000 from a job, your Personal Allowance is already used there, so all your self-employed profit starts at 20%.
• The £100,000 taper. Above £100,000 of adjusted net income, you lose £1 of Personal Allowance for every £2 of income, until it's gone at £125,140. That creates an effective 60% Income Tax rate on income between those two figures. Pension contributions are the usual way to reduce adjusted net income.

Step 3: Class 4 and Class 2 National Insurance

Self-employed National Insurance 2026-27

6%

Class 4 on profit £12,570–£50,270

2%

Class 4 on profit above £50,270

£7,105

Small Profits Threshold

Class 2 treated as paid at or above this

£3.65 a week

Voluntary Class 2

Optional if profit is below the threshold

Class 4 is the main self-employed NI charge. It's worked out on your self-employment profit only, not on wages or other income, and paid through your tax return with your Income Tax. Unlike Income Tax, there's no taper: the £12,570 starting point always applies.

Class 2 used to be a flat weekly charge. From 6 April 2024 nobody has to pay it. If your profits are £7,105 or more, Class 2 is treated as paid, so you build State Pension entitlement for free. Below £7,105, you can pay voluntary Class 2 at £3.65 a week (about £190 a year) to fill the year on your National Insurance record. That's often worth it if you have no other qualifying income.

Worked example: £58,000 profit in England

Sam is a self-employed electrician in Leeds with no other income. For 2026-27 her turnover is £71,000 and her allowable expenses are £13,000, including 9,000 business miles at 55p (£4,950). That leaves a profit of £58,000.

Calculating Sam's 2026-27 bill

1. 1

   Profit

   £71,000 turnover − £13,000 expenses = £58,000.

2. 2

   Income Tax, basic rate

   Profit between £12,570 and £50,270 = £37,700 × 20% = £7,540.

3. 3

   Income Tax, higher rate

   Profit above £50,270 = £7,730 × 40% = £3,092. Total Income Tax: £10,632.

4. 4

   Class 4 National Insurance

   £37,700 × 6% = £2,262, plus £7,730 × 2% = £154.60. Total Class 4: £2,416.60.

5. 5

   Total for the year

   £10,632 + £2,416.60 = £13,048.60, about 22.5% of profit. Class 2 is treated as paid.

Here's the same calculation at other profit levels, for someone in England, Wales or Northern Ireland with no other income:

At £110,000 the Personal Allowance has tapered to £7,570, which is why the jump is so steep.

England vs Scotland: the same profit, different tax

If you live in Scotland, Scottish Income Tax applies to your trading profit. For 2026-27:

• Starter rate 19%: £12,571 to £16,537
• Basic rate 20%: £16,538 to £29,526
• Intermediate rate 21%: £29,527 to £43,662
• Higher rate 42%: £43,663 to £75,000
• Advanced rate 45%: £75,001 to £125,140
• Top rate 48%: over £125,140

Class 4 National Insurance is a UK-wide tax, so it's identical either side of the border. Comparing the total bill:

Total Income Tax + Class 4, 2026-27 (no other income)

Profit	England, Wales, NI	Scotland	Difference
£25,000	£3,231.80	£3,192.13	Scotland £39.67 less
£40,000	£7,131.80	£7,196.87	Scotland £65.07 more
£58,000	£13,048.60	£14,758.65	Scotland £1,710.05 more

£25,000

England, Wales, NI

£3,231.80

Scotland

£3,192.13

Difference

Scotland £39.67 less

£40,000

England, Wales, NI

£7,131.80

Scotland

£7,196.87

Difference

Scotland £65.07 more

£58,000

England, Wales, NI

£13,048.60

Scotland

£14,758.65

Difference

Scotland £1,710.05 more

The gap widens fast once profit passes £43,662, where Scotland's 42% rate starts, well below England's £50,270. Scottish taxpayers pay UK rates on savings and dividends.

When you pay: the tax return and payments on account

Self-employed tax isn't deducted as you go. You report your profit on a Self Assessment tax return and pay by 31 January after the tax year ends. For 2026-27 profits, that's 31 January 2028. If your bill is £1,000 or more and less than 80% of your tax was collected at source, you also make payments on account towards the next year: two instalments, each half of the last bill, on 31 January and 31 July. Class 4 is included.

Sam's payment timeline (first year self-employed in 2026-27)

5 October 2027

Deadline to register for Self Assessment if new

31 January 2028

Pay 2026-27 bill £13,048.60 + first payment on account £6,524.30 = £19,572.90

31 July 2028

Second payment on account for 2027-28: £6,524.30

31 January 2029

Balancing payment for 2027-28 (if profit rose) + first payment on account for 2028-29

That first January, when you pay one and a half years' tax at once, catches out many new sole traders. If your income falls, you can apply to reduce payments on account. If your gross self-employment and property income passes £30,000 (2025-26 figures) you'll also need to send quarterly updates from April 2027 under Making Tax Digital. That changes the reporting, not the amount of tax.

Common mistakes when estimating self-employed tax

• Taxing turnover instead of profit. Expenses come off first, and mileage at the new 55p a mile rate can be a big one.
• Forgetting your other income. A part-time salary uses up the Personal Allowance and lower bands first.
• Mixing up the thresholds. Income Tax and Class 4 both start at £12,570, but Income Tax counts all your income while Class 4 counts only self-employment profit.
• Assuming Class 2 is still due. It isn't, unless you choose voluntary contributions.
• Ignoring payments on account. Budget for the January total, not just the year's tax. The budget planner helps you spread it out.
• Claiming personal costs. Only the business share of your phone, car or home counts.
• Using the wrong country's bands. Your Income Tax depends on where you live, not where your customers are.

Official links

• Income Tax rates and Personal AllowancesEngland and Northern Ireland bands
• Income Tax in ScotlandScottish bands and rates
• Welsh Income TaxWelsh rates
• Self-employed National Insurance ratesClass 2 and Class 4
• Expenses if you're self-employedWhat you can deduct
• Simplified expensesMileage and working-from-home flat rates
• Trading and property allowancesThe £1,000 allowances
• Payments on accountHow advance payments work

What to do next

Work out this year's likely profit, find it in the table above, and start moving that percentage of every payment into a separate tax account today. If you haven't registered yet, our sole trader registration guide explains how. Then use the hourly rate calculator to check your prices leave room for tax and NI. For anything HMRC-specific, the Self Assessment helpline is in our HMRC contact numbers guide.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How do I calculate my tax if I'm self-employed?

Take your income for the tax year and subtract allowable expenses (or the £1,000 trading allowance) to get your profit. Then apply Income Tax: nothing on the first £12,570, 20% up to £50,270, 40% above that and 45% over £125,140. Add Class 4 National Insurance: 6% on profit between £12,570 and £50,270, and 2% above.

How much tax will I pay on £30,000 self-employed profit?

In England, Wales or Northern Ireland for 2026-27: Income Tax is (£30,000 − £12,570) × 20% = £3,486, and Class 4 National Insurance is £17,430 × 6% = £1,045.80. That's £4,531.80 in total, about 15% of profit. With no other income, you don't pay Class 2 or anything on the first £12,570.

Do self-employed people still pay Class 2 National Insurance?

Not compulsorily. Since 6 April 2024, if your profits are £7,105 or more, Class 2 is treated as paid, so your State Pension record is protected without a bill. If profits are below £7,105, you can choose to pay voluntary Class 2 at £3.65 a week to keep building your record.

Should I use the trading allowance or claim expenses?

Use whichever gives the bigger deduction. The trading allowance lets you deduct a flat £1,000 instead of actual expenses, and if your gross trading income is £1,000 or less you may not need to tell HMRC at all. If your real costs are more than £1,000, claim the expenses. You can't claim both, or use capital allowances alongside the allowance.

How much should I put aside for tax as a sole trader?

A rough guide for 2026-27 is 15% of profit at £30,000, about 18% at £40,000 and about 22% at £58,000 in England. Remember that in your second year payments on account can make one January bill much bigger, so save from every invoice into a separate account rather than relying on the final figure.

Is self-employed tax different in Scotland?

Income Tax is. Scotland has six bands for 2026-27, from a 19% starter rate to a 48% top rate, with the 42% higher rate starting at £43,662. Class 4 National Insurance, the personal allowance and the trading allowance are the same across the UK. Wales uses the same bands and rates as England.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 7 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Income Tax rates and Personal Allowances — HMRC / GOV.UK · accessed 7 October 2026
2. 2.Income Tax in Scotland — GOV.UK · accessed 7 October 2026
3. 3.Welsh Income Tax — GOV.UK · accessed 7 October 2026
4. 4.Self-employed National Insurance rates — HMRC / GOV.UK · accessed 7 October 2026
5. 5.Tax-free allowances on property and trading income — HMRC / GOV.UK · accessed 7 October 2026
6. 6.Expenses if you're self-employed — GOV.UK · accessed 7 October 2026
7. 7.Simplified expenses if you're self-employed — GOV.UK · accessed 7 October 2026
8. 8.Understand your Self Assessment bill: payments on account — HMRC / GOV.UK · accessed 7 October 2026
9. 9.Class 2 National Insurance: what's changing from April 2024 — Association of Taxation Technicians · accessed 7 October 2026