UK Self-Employed Tax Guide

How much tax will I pay as self-employed?

A visual guide to UK Self Assessment for the 2025/26 tax year. Worked examples at £30k, £50k and £80k profit. Income Tax, Class 4 NIC and Class 2 explained. Six legal ways to bring the bill down. Plus the new MTD ITSA reality that landed in April 2026.

Updated 10 May 2026 2025/26 figures 14 min read
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Where things stand right now (May 2026)

The 2025/26 tax year ended on 5 April 2026. Your Self Assessment for that year is due online by 31 January 2027, with the balancing payment on the same date. If your bill is over £1,000 you also pay the first Payment on Account toward 2026/27 in January, and the second on 31 July 2027.

Phase 1 of MTD ITSA went live on 6 April 2026. If your gross self-employment plus property income exceeded £50,000 in 2024/25, you should already be enrolled and filing quarterly. The first quarterly update was due by 7 August 2026. If you missed it, you're accruing penalty points; we can help catch up. See the full MTD ITSA guide.

£12,570
Personal Allowance 2025/26
6%
Class 4 NIC basic rate
31 Jan 2027
2025/26 Self Assessment due
Mon to Sat
10am to 7pm support

Key takeaways

  • Personal Allowance £12,570, frozen until at least April 2028. Above that: 20% basic to £50,270, 40% higher to £125,140, 45% additional.
  • The 60% tax trap bites between £100,000 and £125,140 because the Personal Allowance tapers away at £1 lost per £2 earned.
  • Class 4 NIC 6% on profits between £12,570 and £50,270, then 2% above (rate cut from 8% to 6% in April 2024).
  • Class 2 NIC effectively abolished as a mandatory contribution from April 2024. Above the £6,725 Small Profits Threshold you're credited automatically; below it, voluntary at £3.45/week.
  • Worked examples: on £30k profit you pay £4,532 tax (15.1% effective). On £50k, £9,732 (19.5%). On £80k, £22,289 (27.9%).
  • MTD ITSA Phase 1 is LIVE as of April 2026 for £50k+ qualifying income. Phase 2 (£30k+) April 2027. Phase 3 (£20k+) April 2028.
  • Six ways to legally cut the bill: claim every allowable expense, pension contributions, time your invoices, Marriage Allowance, charitable Gift Aid, capital allowances on equipment.
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Written by the chartered accountants team at LOYALS
Updated for the 2025/26 tax year and the May 2026 state of MTD ITSA. King's Cross, London. Mon to Sat 10am to 7pm. Sundays for emergencies.

Pick your section.

Tap any card to jump to that part of the guide.

Worked examples

£30k, £50k and £80k profit, line by line.

Section 01

Income Tax bands

2025/26 rates plus the 60% trap visualised.

Section 02

National Insurance

Class 4 vs Class 2, plus comparison with PAYE.

Section 03

How to calculate

Six steps from turnover to final tax bill.

Section 04

6 ways to cut the bill

Pension, expenses, timing and more, all legal.

Section 05

Deadlines & penalties

Key dates plus the late filing escalator.

Section 06

MTD ITSA reality

What changed in April 2026 and what you do.

Section 07

How LOYALS helps

Real services and honest pricing.

Section 08
SECTION 01

Worked examples: £30k, £50k, £80k profit.

Three scenarios, fully broken down. Net profit (after expenses) at three common income levels, with Income Tax, Class 4 NIC and effective rate spelled out.

Net profit
£30,000
Income Tax£3,486
Class 4 NIC£1,046
Class 2 NIC£0*
Total tax£4,532
15.1% effective rate
Take-home
£25,468
Net profit
£50,000
Income Tax£7,486
Class 4 NIC£2,246
Class 2 NIC£0*
Total tax£9,732
19.5% effective rate
Take-home
£40,268
Net profit
£80,000
Income Tax£19,432
Class 4 NIC£2,857
Class 2 NIC£0*
Total tax£22,289
27.9% effective rate
Take-home
£57,711

*Class 2 NIC is automatically credited if profits exceed £6,725, no payment required. Examples assume sole trader, no other income, standard Personal Allowance, no pension contributions. Your specific bill depends on circumstances.

Notice the jump from £50k to £80k

The extra £30,000 of profit adds £12,557 to the tax bill, because £29,730 of it falls in the 40% higher rate band. This is exactly where pension contributions earn their keep: a £10,000 pension contribution at this income level brings you back below the higher rate threshold and saves around £4,000 in tax plus £200 in Class 4 NIC.

SECTION 02

Income Tax bands 2025/26.

Income Tax rates are the same whether you're employed or self-employed. The difference is what you pay tax on: profit (income minus allowable expenses) for the self-employed, gross salary for employees.

The five bands

BandIncome rangeRate
Personal Allowance£0 to £12,5700%
Basic rate£12,571 to £50,27020%
Higher rate£50,271 to £125,14040%
Personal Allowance taper£100,001 to £125,14060% effective
Additional rateAbove £125,14045%
Income Tax bands 2025/26 (visualised)
0%
£0 to £12,570
Personal Allowance
20%
£12,571 to £50,270
Basic rate
40%
£50,271 to £100,000
Higher rate
60%
£100,001 to £125,140
PA taper trap
45%
£125,141+
Additional rate

Bar widths illustrative, not to scale. The 60% effective rate happens because every £2 of income over £100,000 costs you £1 of Personal Allowance.

Why so many people are creeping into higher rate

The Personal Allowance, basic rate band and higher rate threshold have all been frozen since April 2022 and are set to remain unchanged until at least April 2028. As wages and self-employed profits drift up with inflation while the thresholds stay still, more and more people are pulled into the higher 40% band. This is "fiscal drag." If your profit has grown even modestly over the past three years, your effective tax rate is almost certainly higher than it was.

The 60% tax trap between £100k and £125,140

This is the single most painful zone in the UK Income Tax system. Every pound of profit in this band attracts 40% Income Tax plus 2% Class 4 NIC, plus an effective 20% on top from the lost Personal Allowance. Pension contributions in this band get the full 60% relief: a £10,000 contribution costs you only £4,000 net. We model this for clients each year.

Scotland is different

Scottish residents pay Scottish Income Tax, with five bands instead of three (Starter, Basic, Intermediate, Higher, Top). The Personal Allowance is the same £12,570 (set by Westminster), but the band structure and rates differ significantly. Class 4 NIC is unchanged for Scottish residents (NIC is reserved). If you live in Scotland, our Self-Employment Tax Calculator handles this automatically.

SECTION 03

National Insurance for self-employed.

Two classes used to apply: Class 2 (flat weekly) and Class 4 (percentage on profit). The April 2024 reforms simplified this hugely. Here's the current state.

Class 4 NIC (mandatory)

6% on profits between £12,570 and £50,270, then 2% above

This is the percentage tax you pay on self-employed profit. The rate was cut from 8% to 6% in April 2024, saving sole traders meaningful sums. It's not a state pension contribution; it's a tax. Calculated automatically when you file your Self Assessment.

Class 2 NIC (mostly voluntary)

£3.45/week voluntary if profits below £6,725 SPT

From April 2024, Class 2 is no longer a mandatory contribution. Self-employed earning over the £6,725 Small Profits Threshold are credited automatically (no payment, no charge). Below £6,725 you can pay voluntarily at £3.45/week (£179.40/year) to protect your State Pension entitlement.

Self-employed vs employed NIC at £40,000

Self-employed: Class 4 NIC = (£40,000 − £12,570) × 6% = £1,646. Employed: Class 1 NIC = (£40,000 − £12,570) × 8% = £2,194. Self-employment saves around £548 a year in NIC at this income level. The trade-off: no employer pension contributions, no statutory sick pay, no holiday pay.

SECTION 04

How to calculate your bill, step by step.

Six steps from raw income to final tax owed. Run through them with your own numbers and you'll have a working figure in 15 minutes.

  1. Add up all self-employed income

    Total payments received during the tax year (6 April to 5 April). Include any other income separately (PAYE salary, rental, dividends, interest) for the full picture.

  2. Subtract allowable business expenses

    Deduct everything wholly and exclusively for business: stock, travel (excluding ordinary commute), business mileage at 45p per mile (first 10,000 miles), professional fees, marketing, insurance, accountancy, phone/internet (business proportion), use of home as office. The result is your net profit.

  3. Apply the Personal Allowance

    The first £12,570 of total income is tax-free. Above £100,000 the allowance tapers (lost at £1 per £2). Profit minus PA = taxable profit.

  4. Apply Income Tax rates

    20% on the band from £12,571 to £50,270, 40% from £50,271 to £125,140, 45% above £125,140. The 60% effective rate applies between £100,000 and £125,140 due to the PA taper.

  5. Calculate Class 4 NIC

    6% on net profit between £12,570 and £50,270, plus 2% on profit above £50,270. Class 2 NIC is no payment if profits exceed £6,725.

  6. Add Payments on Account if liability over £1,000

    If your total Self Assessment bill is £1,000+ and less than 80% was collected at source via PAYE, add 50% of next year's estimated bill (due 31 January) and another 50% (due 31 July). These are advance payments.

Worked example: £45,000 profit

Turnover £62,000. Expenses £17,000. Net profit £45,000. Taxable income after PA: £45,000 − £12,570 = £32,430. Income Tax: £32,430 × 20% = £6,486. Class 4 NIC: £32,430 × 6% = £1,946. Total bill: £8,432. Take-home: £36,568. Effective rate: 18.7%. Class 2 NIC = £0 (above SPT, automatic credit).

Run your own numbers in 60 seconds.

Self-Employment Calculator →

Want this done for you, properly?

Self Assessment from £180 fixed fee for a simple sole trader. Monthly accounting (now including MTD ITSA quarterly submissions for Phase 1 clients) from £85/month. Free 15-min call to scope your specific setup.

Book a free 15-min call
SECTION 05

6 legal ways to cut your tax bill.

Tax avoidance (legal) is very different from tax evasion (illegal). Every strategy below is HMRC-approved and routine. The trick is implementing them properly and at the right time.

STRATEGY 01

Claim every allowable expense

Most sole traders under-claim. Use of home as office, mileage at 45p/mile (first 10,000), training, professional subscriptions, bank charges, phone (business proportion), software. A proper expense review picks up things people forget.

Saves variable
STRATEGY 02

Pension contributions

Personal pension contributions get tax relief at your highest marginal rate. £10,000 contribution saves £2,000 (basic), £4,000 (higher), £6,000 (60% trap zone). Annual allowance £60,000, with carry-forward of unused allowance from previous three years.

Saves up to 60%
STRATEGY 03

Consider incorporation

When profits regularly exceed £40k to £50k, a limited company often wins on tax. Salary plus dividend extraction at 8.75% can beat 20% Income Tax + 6% NIC. The April 2025 employer NIC hike narrowed the gap; run real numbers through our calculator before deciding.

Saves £3k to £8k+
STRATEGY 04

Time your invoices and expenses

If you're sitting on the higher rate threshold, delaying an invoice from late March into early April moves the income into the next tax year. Conversely, bringing forward equipment purchases into the current year claims AIA now. Timing matters at the edges.

Saves variable
STRATEGY 05

Marriage Allowance

If your spouse or civil partner earns under £12,570 and you earn under £50,270, they can transfer £1,260 of unused PA to you. Worth £252 per year, backdatable up to 4 tax years (so up to £1,008 in one go). Free to apply on GOV.UK.

Saves £252/year
STRATEGY 06

Annual Investment Allowance on equipment

Up to £1 million of qualifying equipment (computers, vans, machinery, integral features) gets 100% deduction in the year of purchase. New electric vehicles get a separate 100% First Year Allowance. Time large purchases for maximum benefit.

Saves up to 47%

The three strategies that move the needle most for our clients

In order: (1) Pension contributions, especially if you're anywhere near £100k or already in the 60% trap. (2) Proper expense capture with cloud accounting from day one rather than reconstructing in January. (3) Incorporation modelling at the right profit level. The other strategies help at the margin.

SECTION 06

Deadlines and the penalty escalator.

Missing the 31 January Self Assessment deadline costs you guaranteed money. Here are the four key dates and the penalty ladder if you miss the big one.

Four key dates for the 2025/26 tax year

DateWhat's due
5 October 2026Register for Self Assessment if 2025/26 was your first year of trading
31 October 2026Paper SA100 deadline (almost no-one uses this any more)
31 January 2027Online SA100 + balancing payment + first Payment on Account for 2026/27
31 July 2027Second Payment on Account for 2026/27

The late filing penalty escalator

Penalties accrue automatically and stack on top of each other. The ladder below shows what happens to a single late SA100.

Day 1 late
£100 fixed penalty

Automatic, even if no tax is owed. Cannot be reduced for first offence.

3 months late
+£10 per day, capped at £900

Daily penalties accrue automatically until the return is filed or 90 days pass.

6 months late
+£300 (or 5% of tax due, whichever higher)

In addition to the previous penalties, not instead of. Running total can exceed £1,300.

12 months late
Another £300 (or 5% of tax due)

Behaviour-based penalties up to 100% of tax can apply for deliberate non-compliance.

Late payment penalties are separate from filing penalties: 5% surcharge after 30 days, again at 6 months, and again at 12 months. Interest accrues on the unpaid balance throughout (Bank of England base rate plus 4%). For our monthly accounting clients, on-time filing and payment scheduling is part of the standard service.

Payments on Account: the January cash flow trap

If your 2025/26 tax bill is £6,000, you don't just pay £6,000 on 31 January 2027. You also pay 50% of next year's estimated bill (£3,000) as the first Payment on Account on the same day. So your January cheque is actually £9,000. The second £3,000 follows on 31 July 2027. If your income drops, you can claim a reduction via your SA account or form SA303 (we do this automatically for monthly clients when profits drop).

SECTION 07

MTD ITSA: the new quarterly reality.

Phase 1 of MTD for Income Tax went live on 6 April 2026. If your gross self-employment plus property income exceeded £50,000 in 2024/25, you're in. Here's what it means in practice.

The headline rules

  • Phase 1 (£50k+) is live now. First quarterly update was due by 7 August 2026.
  • Phase 2 (£30k+) starts 6 April 2027 using your 2025/26 income to test.
  • Phase 3 (£20k+) starts 6 April 2028 using your 2026/27 income.
  • Quarterly updates due 7 August, 7 November, 7 February, 7 May.
  • End of Period Statement (EOPS) by 31 January following the tax year end.
  • Final Declaration by 31 January (replaces the SA100). This is where final tax is computed.

Penalty regime is points-based

Each missed quarterly submission = 1 penalty point. At 4 points (for quarterly filers) you trigger a £200 penalty. Then £200 every subsequent late submission until points clear after 24 months of full compliance. Late payment penalties run separately.

For the full MTD ITSA mechanics including software options, joint property handling, late catch-up and the points-based penalty regime, see our dedicated guide.

Full MTD ITSA visual guide with timeline, decision tree and catch-up plan.

Read the MTD guide →
SECTION 08

How LOYALS helps.

Real services, honest pricing, no overpromising. We're a chartered accountancy practice in King's Cross working with sole traders and growing businesses across London and remotely across the UK.

What we do for self-employed clients

  • One-off Self Assessment from £180 fixed fee for a simple sole trader return. Includes preparation, optimisation, e-filing and HMRC correspondence on the return. See Self-Assessment & Personal Tax.
  • Monthly accounting from £85/month. Bookkeeping, quarterly profit and tax reports, year-end accounts, SA100, all HMRC correspondence. For Phase 1 MTD ITSA clients, this includes the four quarterly submissions, EOPS and Final Declaration. See MTD for Income Tax.
  • Tax planning advisory for clients sitting in the 60% trap, considering incorporation, or with multiple income streams. Fixed fee project work. See Tax Planning Advisory.
  • Switching from your current accountant handled end to end, free, in 2 to 3 weeks. See Switching Accountants.

All pricing is fixed-fee and quoted at the free 15-min scoping call once we understand your specific situation (one income source vs multiple, software preference, whether MTD applies).

What sets us apart

Chartered accountants, not bookkeepers. Mon to Sat 10am to 7pm, Sundays for emergencies (we work the same hours your business does). Fixed monthly fees with no surprise year-end bills. Free 15-min scoping call before you commit. King's Cross office plus remote service across the UK.

Common self-employed tax questions.

Ten of the questions we get asked most often, mirrored in the FAQ schema.

How much tax do I pay on £30,000 self-employed profit in 2025/26?+
On £30,000 net profit you pay £3,486 Income Tax (20% on £17,430 above the £12,570 Personal Allowance) plus £1,046 Class 4 NIC (6% on the same £17,430). Total tax £4,532. Take-home £25,468. Effective rate around 15.1%. Class 2 NIC is no payment if your profits exceed £6,725; you're credited automatically.
What National Insurance do self-employed pay in 2025/26?+
Class 4 NIC: 6% on profits between £12,570 and £50,270, 2% above £50,270. Class 2 NIC: effectively abolished as a mandatory contribution from April 2024; self-employed earning above £6,725 are credited as paid; below that, voluntary at £3.45/week (£179.40/year) to protect State Pension.
What is the Self Assessment deadline for 2025/26?+
31 January 2027 for online filing and the balancing payment. 31 October 2026 for paper returns (almost no-one uses this any more). Late filing triggers an automatic £100 penalty even if no tax is owed; daily penalties of £10 kick in after 3 months, plus 5% surcharges at 6 and 12 months.
Does MTD ITSA apply to me as self-employed in 2025/26?+
Phase 1 of MTD ITSA went live on 6 April 2026 for self-employed and landlords with qualifying income above £50,000 (gross self-employment plus property income, before expenses). Phase 2 (£30,000+) starts April 2027. Phase 3 (£20,000+) starts April 2028. The threshold uses your 2024/25 income for Phase 1.
What is the 60% tax trap?+
Between £100,000 and £125,140 of total income, the Personal Allowance tapers away at £1 lost for every £2 earned over £100,000. The combined effect of 40% Income Tax plus the lost allowance creates an effective 60% marginal tax rate in this band. Pension contributions in this zone get the full 60% tax relief, making them extraordinarily efficient.
Should I incorporate to a limited company?+
As a rule of thumb, when each owner's profits regularly exceed £40,000 to £50,000 a limited company starts to win on tax. Below that, sole trader usually wins on simplicity and cost. The 2024 reduction in dividend allowance (now £500) and the April 2025 employer NIC hike narrowed the gap. Run real numbers through our Sole Trader vs Limited Company Calculator before deciding.
What expenses can a sole trader claim?+
Anything wholly and exclusively for the business: stock, office costs, travel (excluding ordinary commute), business mileage at 45p per mile (first 10,000 miles, 25p thereafter), professional fees, marketing, training to maintain existing skills, business insurance, phone and internet (business proportion), use of home as office, capital allowances on equipment. Items used partly privately need a reasonable apportionment.
How much does a Self Assessment tax return cost with LOYALS?+
From £180 fixed fee for a simple sole trader Self Assessment with one income source. Monthly accounting (which now also covers MTD ITSA quarterly submissions for clients in Phase 1) starts from £85 per month. Both quoted at the free 15-min scoping call once we understand your specific situation.
What if I miss the 31 January filing deadline?+
Automatic £100 fixed penalty on day one. From 3 months late: £10 per day, capped at £900. At 6 months: £300 or 5% of tax due, whichever higher. At 12 months: another £300 or 5%. Late payment penalties run separately: 5% surcharge after 30 days, again at 6 months and 12 months. Interest accrues throughout. Behaviour-based penalties (up to 100% of tax) for deliberate non-compliance.
Can pension contributions reduce my self-employed tax bill?+
Yes, significantly. Personal pension contributions get tax relief at your highest marginal rate. A £10,000 pension contribution saves £2,000 if you're a basic rate taxpayer (£2,600 including Class 4 NIC effect on the deduction), £4,000 if higher rate, or £6,000 in the 60% tax trap zone. Annual allowance £60,000, with carry-forward of unused allowance from the previous three years.

Stop guessing. Get a fixed quote.

Free 15-minute call with a chartered accountant. We'll tell you what your 2025/26 SA100 will cost, whether MTD ITSA applies to you yet, and which of the six tax-saving strategies above will move the needle most for your specific situation. No obligation, no upsell.

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