📋 What's in this guide
If you're self-employed in the UK, working out your tax bill can feel overwhelming. Between Income Tax, two types of National Insurance, and various thresholds that change regularly, it's no wonder so many freelancers and sole traders end up either overpaying or being caught off guard by an unexpectedly large bill in January.
This guide breaks everything down using the confirmed 2025/26 tax year rates (6 April 2025 to 5 April 2026). We'll walk through real examples at different income levels, explain exactly what you owe and when, and share the strategies our chartered accountants use every day to help clients across London — from Camden and Islington to Westminster and Hackney — keep more of what they earn.
How Much Tax on £30K, £50K, and £80K Self-Employed Profit?
Let's start with what you actually care about — the numbers. These examples assume you're a sole trader with no other income, using the standard Personal Allowance and no pension contributions. Your expenses have already been deducted, so these figures represent your net profit (what's left after business costs).
*Class 2 NI is automatically treated as paid if profits exceed £6,845 — no payment required. These are estimates; your actual bill depends on individual circumstances.
The jump from £50,000 to £80,000 profit adds £30,000 to your income — but your tax bill increases by £12,557. That's because £29,730 of that extra income falls into the 40% higher-rate band. This is exactly where professional tax planning makes the biggest difference. Pension contributions, for example, could bring you back below the higher-rate threshold and save thousands.
Income Tax Rates for Self-Employed 2025/26
Income Tax works the same whether you're employed or self-employed — the rates are identical. The difference is that as a self-employed person, you pay tax on your profit (income minus allowable business expenses) rather than your gross salary. Here are the bands for England, Wales, and Northern Ireland:
| Tax Band | Taxable Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
The Personal Allowance, basic rate limit, and higher rate threshold have all been frozen at these levels since April 2022 and are set to remain unchanged until at least April 2028. Because wages and business profits tend to rise with inflation while the thresholds stay fixed, more people are being pulled into higher tax bands each year — a process known as "fiscal drag." If your profits have grown even modestly over the past few years, you might find yourself paying a noticeably higher effective tax rate than before.
If your income falls between £100,000 and £125,140, your Personal Allowance is reduced by £1 for every £2 earned above £100,000. This creates an effective marginal tax rate of 60% on that band of income. For example, earning £110,000 means you lose £5,000 of your Personal Allowance, which is then taxed at 40% — costing you an extra £2,000 on top of the 40% you're already paying. Strategic pension contributions are the most effective way to avoid this trap entirely.
Scotland is different
If you live in Scotland, you'll pay Scottish Income Tax rates, which include additional bands (Starter, Intermediate, Advanced, and Top rates). The rates range from 19% to 48%. The Personal Allowance remains the same at £12,570, but the band structure differs significantly. If you're self-employed and Scottish-resident, make sure you're using the correct rates — our Self-Employment Tax Calculator handles this automatically.
National Insurance for Self-Employed People (2025/26)
National Insurance is where self-employment tax gets a bit more complex. As a self-employed person, you may encounter two classes of NI — Class 2 and Class 4. Here's how they work following the significant changes introduced from April 2024 onwards:
📋 Class 4 NI (Mandatory)
You pay 6% on profits between £12,570 and £50,270, and 2% on anything above £50,270. This is calculated automatically when you file your Self Assessment. Class 4 NI does not count towards your state pension or any benefits — it is purely a tax on self-employed profits. The rate was reduced from 9% to 6% from April 2024, saving self-employed workers a meaningful amount each year.
🛡️ Class 2 NI (Mostly Voluntary)
Since April 2024, Class 2 NI is no longer mandatory for most self-employed people. If your profits are above the Small Profits Threshold of £6,845, you're automatically treated as having paid Class 2 for state pension purposes — without actually paying anything. If your profits are below £6,845, you can choose to pay voluntarily at £3.50/week (£182/year) to protect your pension entitlement.
On a £40,000 profit, your Class 4 NI would be: (£40,000 − £12,570) × 6% = £1,645.80. You wouldn't pay Class 2 NI at all (your profits are above £6,845, so you're automatically credited). Compare this to an employee earning £40,000 who would pay 8% NI = £2,194.40. Self-employment saves you roughly £549 per year in NI alone at this income level.
How to Calculate Your Self-Employed Tax Bill (Step by Step)
Here's the process you (or your accountant) follow to work out what you owe HMRC. It's simpler than it looks once you understand the sequence:
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Add up all your self-employed income
This is your total turnover — every payment received for your work during the tax year (6 April 2025 to 5 April 2026). If you also have employment income or other sources, include those too.
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Subtract your allowable business expenses
Deduct everything you've spent "wholly and exclusively" for business purposes — materials, travel, insurance, marketing, accountancy fees, phone (business proportion), home office costs, and more. What's left is your net profit.
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Subtract your Personal Allowance (£12,570)
This gives you your taxable profit. If your total income is under £12,570, you won't pay Income Tax (but may still owe NI if profits exceed £12,570). Remember: the Personal Allowance reduces for incomes above £100,000.
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Apply Income Tax rates to your taxable profit
The first £37,700 of taxable profit is charged at 20% (basic rate). The next £74,870 is charged at 40% (higher rate). Anything above £125,140 total income is charged at 45%.
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Calculate your Class 4 National Insurance
Apply 6% to net profits between £12,570 and £50,270, plus 2% on any profits above £50,270. This is added to your Income Tax to form your total tax bill.
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Check for Payments on Account
If your total tax bill exceeds £1,000 (and less than 80% was collected at source), you'll need to make advance payments towards next year's bill — 50% by 31 January and 50% by 31 July. Factor these into your cash flow planning.
Turnover: £62,000. Expenses: £17,000. Net profit: £45,000. Taxable income after Personal Allowance: £45,000 − £12,570 = £32,430. Income Tax: £32,430 × 20% = £6,486. Class 4 NI: £32,430 × 6% = £1,945.80. Total bill: £8,431.80. Take-home: £36,568.20. Effective rate: 18.7%.
6 Legal Ways to Reduce Your Self-Employed Tax Bill
Tax avoidance (legal) is very different from tax evasion (illegal). Every strategy below is fully approved by HMRC and used routinely by chartered accountants across the UK. The key is knowing which ones apply to your situation and implementing them correctly.
Claim Every Allowable Expense
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Expenses You Might Be Missing
Most self-employed people claim just 10–15% of turnover as expenses, when 20–40% is typical. Commonly missed deductions include use-of-home (£6/week or actual proportion), professional subscriptions, training courses, bank charges, and mileage at 45p per mile for the first 10,000 miles. LOYALS clients save an average of £3,200 through proper expense reviews.
Pension Contributions
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The Most Powerful Tool
Personal pension contributions receive tax relief at your highest rate. Contributing £10,000 on a £60,000 income saves £4,000 in tax (40% relief) AND brings you below the higher-rate threshold. You can contribute up to £60,000 per year, plus carry forward unused allowances from the previous three years. This is the single biggest tax saver for higher earners.
Consider Incorporation
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Limited Company Route
Above roughly £50,000–£60,000 profit, forming a limited company can save significant tax. You'd pay yourself a small salary (around £12,570) and take the rest as dividends taxed at 8.75% (basic) instead of 20% Income Tax + 6% NI. The savings can be £3,000–£8,000+ per year. However, it comes with more admin and accountancy costs — a professional should model both scenarios for you.
Tax-Efficient Timing
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Time Your Income Strategically
If you're near a tax band threshold, timing matters. Delaying an invoice by a few weeks (from March to April) moves that income into the next tax year. Equally, bringing forward expenses into the current year reduces this year's profit. Capital purchases can be timed for maximum Annual Investment Allowance benefit. Your accountant can advise on the best timing strategy.
Marriage Allowance
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Transfer Unused Allowance
If you're married or in a civil partnership and one partner earns under £12,570, they can transfer £1,260 of their Personal Allowance to the higher earner — saving £252 per year. It's a simple HMRC form and can be backdated up to four years, meaning you could claim up to £1,008 in one go. It's small but it's free money.
Gift Aid & Charitable Giving
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Extend Your Basic Rate Band
Gift Aid donations extend your basic rate band by the gross value of your donation. If you're a higher-rate taxpayer donating £1,000, you get 20% additional relief on your tax return (£250 back). For those near the £50,270 threshold, this can effectively pull some income back into the basic rate band. Every little helps when you're trying to stay below a threshold.
Payment Deadlines for the 2025/26 Tax Year
Missing a deadline costs you money — guaranteed. HMRC penalties are automatic and unforgiving. Here are the key dates to put in your calendar right now:
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5 October 2026Deadline to register for Self Assessment if this is your first year of self-employment (you started trading between 6 April 2025 and 5 April 2026). Missing this can trigger a penalty.
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31 October 2026Deadline for paper tax returns (if you still file on paper). Most people file online, so this deadline typically doesn't apply — but if you do file by post, don't miss it.
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31 January 2027The big one. Deadline to file your online Self Assessment return AND pay your 2025/26 tax bill in full. If your bill exceeds £1,000, this is also when the first Payment on Account (50% of next year's estimated bill) is due. Miss this and you face an automatic £100 penalty plus interest.
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31 July 2027Second Payment on Account due (the remaining 50% advance payment towards 2026/27). If your income has dropped, you can apply to reduce these payments — something LOYALS handles automatically for monthly clients.
The penalties ramp up fast. Miss 31 January: automatic £100 fine. After 3 months: £10/day for 90 days (up to £900). After 6 months: 5% of tax owed or £300, whichever is greater. After 12 months: a further 5% or £300. Plus interest accrues on all unpaid tax from day one. LOYALS clients have achieved zero late filings and zero penalties — we handle everything with built-in buffer time.
If your self-employed turnover is £50,000 or above, you'll face additional quarterly reporting deadlines from April 2026 onwards. You'll need to submit digital updates of your income and expenses to HMRC every three months, on top of the annual Self Assessment. LOYALS handles this entirely — just send us your bank statements each quarter and we'll prepare and file everything on your behalf for £600 per year. No software to learn, no quarterly deadlines to remember. Book a free call to prepare for MTD →
What are Payments on Account?
Payments on Account catch a lot of first-time self-employed people by surprise. They're essentially advance payments towards next year's tax bill, based on what you owed this year. If your 2025/26 tax bill is £6,000, you'll pay that £6,000 by 31 January 2027, PLUS two advance payments of £3,000 each (31 January 2027 and 31 July 2027) — meaning your total outgoing in January is actually £9,000. The good news? If your income drops the following year, you can claim a reduction. The bad news? Most people don't know this until they get the bill.
See Your Exact Tax Bill in 60 Seconds
Our free Self-Employment Tax Calculator uses the official HMRC rates to give you an instant breakdown of Income Tax, National Insurance, and take-home pay — so you know exactly where you stand before you even speak to an accountant.
Use Free Tax Calculator →How LOYALS Helps Self-Employed Clients Across London
As chartered accountants based in King's Cross, we work with over 500 self-employed clients across every London borough — from sole traders in Southwark to freelancers in Hammersmith, contractors in the City of London, and growing businesses in Wandsworth. We understand the challenges because we see them every day, and we've built our services specifically around what self-employed people actually need.
Our clients save an average of £3,200 per year through proper expense optimisation, pension planning, and proactive tax strategies. Beyond the numbers, they get peace of mind: zero HMRC penalties, professional HMRC correspondence handling, Payment on Account management, and seven-day support when questions come up on a Sunday afternoon.
Self Assessment Tax Return
Perfect for sole traders, freelancers, and side-hustle earners with straightforward tax affairs. We handle everything from start to finish:
Self Assessment + MTD Quarterly Filing
Designed for higher-earning self-employed professionals who fall under the new Making Tax Digital rules from April 2026. Full hands-off service:
Both services include year-round HMRC correspondence handling, deadline management, pension planning advice, and Payment on Account reduction claims. Whether you're in Camden or Kensington, Lambeth or Tower Hamlets, we're available Monday to Friday 9am–6pm, and weekends 10am–5pm.
From April 2026, if your self-employed turnover exceeds £50,000, HMRC requires you to keep digital records and submit quarterly updates of your income and expenses using MTD-compatible software. This is a significant change from the current annual Self Assessment system. Our £600 service covers everything: we handle your quarterly filings, keep your records MTD-compliant, and submit your final end-of-year declaration — so you stay on the right side of the new rules from day one. Book a free call to discuss your MTD obligations →