Self-Employed Tax Calculator

As a self-employed person, HMRC does not tax everything you earn. They tax your taxable profit, which is your total income minus the money you spent on running your business.

Business expenses reduce your taxable profit, which directly lowers your tax bill. This is why keeping accurate records of what you spend on your work matters. Missed expenses means paying more tax than you need to.

Allowable expenses include things like tools, equipment, phone bills, travel costs, professional subscriptions, and a proportion of home costs if you work from home. HMRC publishes a full list of what counts.

A simple example

HMRC calculates your tax based on £32,000, not the full £40,000 you earned. The £8,000 of legitimate expenses saves you money.

Income Tax

The UK uses a banded system. The first slice of your profit up to the Personal Allowance (£12,570) is tax-free, and only the amount above that is taxed at the rate for that band.

National Insurance

Self-employed people pay Class 4 NI on profits. Class 2 NI was scrapped in April 2024, so there is only one rate to worry about now.

Class 1 NI applies to employees, not the self-employed.

Employees have their tax deducted automatically before they receive their wages. As a self-employed person, that does not happen. Instead, you tell HMRC what you earned each year by filing a Self Assessment tax return.

You need to register for Self Assessment if you earned more than £1,000 from self-employment in a tax year. If you have not registered yet, you can do it on the HMRC website. It takes about 10 minutes and HMRC will send you a Unique Taxpayer Reference (UTR) number in the post.

The UK tax year runs from 6 April to 5 April. The 2026/27 tax year ends on 5 April 2027.

Making Tax Digital (MTD) is a government programme that changes how self-employed people report their income to HMRC. Instead of one annual tax return, you will send four quarterly updates using approved software, plus a final summary at the end of the year.

The first phase is already active. Since April 2026, self-employed people and landlords with income over £50,000 per year have been required to use MTD-compatible software. The idea is to spread the work across the year rather than scrambling to find a year's worth of receipts every January.

How much tax do I pay when self-employed?

You pay Income Tax and Class 4 National Insurance on your profit, not on everything you invoice. The first £12,570 is covered by the Personal Allowance. Profit between £12,571 and £50,270 is taxed at 20% Income Tax plus 6% Class 4 National Insurance, and profit above £50,270 at 40% plus 2%.

How much can I earn before paying tax if self-employed?

The Personal Allowance is £12,570 for the 2026/27 tax year, so you pay no Income Tax on profit below that. You must still register for Self Assessment if you earned more than £1,000 from self-employment.

Do I still pay Class 2 National Insurance?

No. Class 2 National Insurance was abolished in April 2024. Self-employed people now pay only Class 4 National Insurance on their profit.

What is taxable profit?

Taxable profit is your total income minus your allowable business expenses. HMRC taxes that figure rather than your turnover, which is why recording every legitimate expense lowers your bill.

When is my Self Assessment tax return due?

For the 2026/27 tax year, an online return is due by 31 January 2028, and any tax owed is due the same day. If this is your first year of self-employment you must also register with HMRC by 5 October 2027.

What expenses can I claim as a sole trader?

Allowable expenses include tools, equipment, materials, business travel and mileage, a share of your phone and internet, professional fees, and a proportion of home costs if you work from home. Business mileage is claimed at 55p per mile for the first 10,000 miles in a tax year and 25p per mile after that.