How self-employed tax is worked out
When you work for yourself, nobody deducts tax from your income as you earn it. Instead you report your profit on a Self Assessment tax return after the tax year ends, and HMRC works out two things: income tax and Class 4 National Insurance.
Your profit is your turnover minus allowable expenses: things like equipment, travel for work, phone and internet use, and accountancy fees. If your expenses are small, you can deduct the £1,000 trading allowance instead.
Income tax rates for 2025/26
- Personal Allowance: the first £12,570 is tax-free (reduced by £1 for every £2 of income over £100,000).
- Basic rate: 20% on the next £37,700.
- Higher rate: 40% up to £125,140.
- Additional rate: 45% above £125,140.
If you also have a job, your salary uses up your Personal Allowance and basic-rate band first, so more of your self-employed profit can fall into the higher rate. The calculator above combines both.
Class 4 National Insurance
Class 4 is charged at 6% on profits between £12,570 and £50,270 and 2% on profits above £50,270. It's collected through your tax return alongside income tax. Class 2 is no longer compulsory, but you can still pay it voluntarily if your profits are low and you want to protect your State Pension record.
Payments on account
If your Self Assessment bill is £1,000 or more, HMRC usually asks you to pay towards next year's bill in advance: two payments on account, each half of this year's bill, due on 31 January and 31 July. That's why your first January bill as a sole trader can be much bigger than expected. Use the payments on account calculator to see yours.
Setting money aside
A simple rule of thumb is to put aside 25–30% of your profit for tax and National Insurance. That's more than you'll need if you're a basic-rate taxpayer, but it covers payments on account in your first year.
When you need to file
For 2025/26, register for Self Assessment by 5 October 2026 if you're new to it, file online by 31 January 2027 and pay what you owe by the same date. See the full list on the deadlines page, or check whether you need to file with our “do I need to file?” checker.
When you're ready, TaxGo turns your figures and documents into a complete return, ready for you to check and approve, for £79.