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Self-Employed Tax Calculator 2025/26

Calculate your self-employed tax including income tax, Class 2 and Class 4 National Insurance contributions, and payments on account. Updated for the 2025/26 tax year.

How Self-Employed Tax is Calculated

Self-employed tax in the UK comprises income tax and National Insurance contributions. The calculation starts with your total business turnover (all income received from self-employment), from which you deduct either your allowable business expenses or the £1,000 trading allowance. The result is your taxable profit.

Income tax is then calculated on your taxable profit using the same personal allowance and tax bands as employed workers. For 2025/26, the personal allowance is £12,570, and the basic rate of 20% applies to income between £12,571 and £50,270. Higher rate (40%) applies from £50,271 to £125,140, and the additional rate (45%) applies to income above £125,140.

National Insurance for the self-employed consists of two classes. Class 2 NI is a flat weekly rate of £3.45 (£179.40 per year), payable if your profits exceed £12,570. Class 4 NI is calculated at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Both are collected through your Self Assessment tax return.

Self-Employed Tax Rates for 2025/26

TaxRateThreshold
Personal Allowance0%Up to £12,570
Basic Rate20%£12,571 to £50,270
Higher Rate40%£50,271 to £125,140
Additional Rate45%Over £125,140
Class 2 NI£3.45/weekProfits over £12,570
Class 4 NI (lower)6%£12,570 to £50,270
Class 4 NI (upper)2%Over £50,270

What Changed in April 2025

Several changes in April 2025 affect self-employed workers. The personal allowance remains frozen at £12,570, continuing the fiscal drag that pulls more self-employed earners into higher tax bands as their income grows with inflation. The basic rate threshold also remains frozen at £50,270.

Class 2 National Insurance contributions remain at £3.45 per week. Class 4 NI rates are 6% on profits between £12,570 and £50,270, and 2% above £50,270. The government had previously announced plans to abolish Class 2 NI, but this has been deferred and the charge remains in place for 2025/26.

The VAT registration threshold has increased to £90,000 from April 2024 and remains at this level for 2025/26, which is relevant for self-employed workers approaching this turnover level.

Worked Examples

Example 1: Sole Trader Earning £40,000 Profit

A self-employed plumber in England with £40,000 taxable profit and no other deductions:

  • Personal allowance: £12,570
  • Taxable income: £40,000 - £12,570 = £27,430
  • Income tax: £27,430 at 20% = £5,486.00
  • Class 2 NI: £179.40 (flat rate)
  • Class 4 NI: £27,430 at 6% = £1,645.80
  • Total tax: £5,486.00 + £179.40 + £1,645.80 = £7,311.20
  • Take home: £40,000 - £7,311.20 = £32,688.80
  • Effective rate: 18.3%

Example 2: Freelancer Using Trading Allowance

A freelance writer with £5,000 turnover using the trading allowance:

  • Turnover: £5,000
  • Trading allowance: £1,000
  • Taxable profit: £5,000 - £1,000 = £4,000
  • Income tax: £0 (below personal allowance)
  • Class 2 NI: £0 (below threshold)
  • Class 4 NI: £0 (below threshold)
  • Total tax: £0

Example 3: High-Earning Consultant

A self-employed IT consultant with £80,000 profit:

  • Personal allowance: £12,570
  • Basic rate tax: £37,700 at 20% = £7,540.00
  • Higher rate tax: £29,730 at 40% = £11,892.00
  • Total income tax: £19,432.00
  • Class 2 NI: £179.40
  • Class 4 NI: £37,700 at 6% = £2,262.00 + £29,730 at 2% = £594.60 = £2,856.60
  • Total tax: £22,468.00
  • Take home: £57,532.00

Trading Allowance vs Actual Expenses

The trading allowance is a £1,000 tax-free allowance that you can deduct from your self-employed income instead of claiming actual expenses. It is most beneficial when your actual business expenses are less than £1,000. If your expenses exceed £1,000, you should claim actual expenses instead as this will give you a larger deduction and reduce your tax bill further.

You cannot use both the trading allowance and actual expenses. You must choose one or the other each tax year. If your total self-employed income is under £1,000, the trading allowance means you have no taxable profit and do not need to register for Self Assessment or report this income.

Common Mistakes for Self-Employed Workers

1. Forgetting Class 4 NI

Many self-employed people calculate their income tax correctly but forget about Class 4 National Insurance. At 6% on profits between £12,570 and £50,270, this can add over £2,000 to your annual tax bill. Always account for Class 4 NI when estimating your tax liability.

2. Not Setting Money Aside for Tax

Unlike employed workers who have tax deducted at source through PAYE, self-employed workers must pay their own tax through Self Assessment. A common mistake is not setting aside enough money during the year, leading to a large tax bill that is difficult to pay. As a rule of thumb, set aside 25-30% of your profit for tax and NI, or use this calculator to get a precise figure.

3. Missing Allowable Expenses

Many self-employed workers fail to claim all their allowable expenses, paying more tax than necessary. Keep detailed records of all business expenses throughout the year. Common overlooked expenses include professional subscriptions, working-from-home costs, professional development, and use of personal vehicles for business travel.

4. Ignoring Payments on Account

If your Self Assessment tax bill exceeds £1,000, you will likely need to make payments on account. These are advance payments towards your next tax bill and can catch new self-employed workers off guard, as the first year requires payment of the current year tax plus 50% advance for the next year.

Frequently Asked Questions

How much tax do I pay as self-employed?
As a self-employed person in the UK, you pay income tax on your taxable profits (turnover minus allowable expenses) at the same rates as employed workers. For 2025/26, the personal allowance is £12,570, basic rate is 20% (£12,571 to £50,270), higher rate is 40% (£50,271 to £125,140), and additional rate is 45% (over £125,140). In addition to income tax, you pay Class 2 National Insurance at £3.45 per week (£179.40 per year) if your profits exceed £12,570, and Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
What is the trading allowance?
The trading allowance is a £1,000 tax-free allowance for self-employed individuals. If your total self-employed income is under £1,000, you do not need to register for Self Assessment or pay tax on it. If your income exceeds £1,000, you can choose to either deduct the £1,000 trading allowance from your gross income instead of claiming actual expenses, or claim your actual business expenses. You cannot use both. The trading allowance is particularly useful for people with small side businesses or freelance income where actual expenses are less than £1,000.
What are Class 2 and Class 4 National Insurance?
Self-employed workers pay two types of National Insurance. Class 2 NI is a flat rate of £3.45 per week (£179.40 per year) payable if your profits exceed £12,570. Class 2 contributions count towards your State Pension entitlement. Class 4 NI is calculated on your profits: 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Class 4 NI does not count towards State Pension but is mandatory. Both are paid through your Self Assessment tax return.
What are payments on account?
Payments on account are advance payments towards your next tax bill. HMRC requires you to make two payments on account if your Self Assessment tax bill is £1,000 or more and less than 80% of your tax is collected at source. Each payment is 50% of the previous year total tax bill (income tax, Class 2 NI, and Class 4 NI). The first payment is due on 31 January (during the tax year) and the second on 31 July (after the tax year ends). Any difference is settled with a balancing payment on the following 31 January.
What expenses can I claim as self-employed?
As a self-employed person, you can deduct allowable business expenses from your turnover to reduce your taxable profit. Common expenses include office costs (stationery, phone bills, internet), travel costs (fuel, train fares, parking), clothing (uniforms or protective clothing, not everyday clothing), staff costs, financial costs (insurance, bank charges), marketing costs, and professional fees (accountant, solicitor). If you work from home, you can claim a proportion of your household bills. HMRC provides simplified expenses rates for vehicles, working from home, and living on business premises.
When do I need to submit my Self Assessment tax return?
For the 2025/26 tax year (6 April 2025 to 5 April 2026), the deadlines are: paper returns by 31 October 2026, and online returns by 31 January 2027. You must also pay any tax owed by 31 January 2027. If you need to make payments on account, the first payment is due 31 January 2026 and the second on 31 July 2026. Late filing incurs an automatic £100 penalty, and late payment results in interest charges and potential surcharges.
Do I need to register for Self Assessment?
You must register for Self Assessment with HMRC if your self-employed income exceeds £1,000 in a tax year (before the trading allowance is applied). You should register by 5 October following the end of the tax year in which you became self-employed. For example, if you started self-employment in June 2025, you must register by 5 October 2026. You can register online through the HMRC website. Even if you make a loss, you should still register as this loss can be carried forward to offset against future profits.

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