Free tool · UK 2026/27 self-assessment
UK Self-Employed Tax Calculator
What will you actually owe HMRC as a UK sole trader? Income tax, Class 4 NI, Class 2 NI, payments on account, and the personal allowance taper if your profit crosses £100k. 2026/27 rates.
How UK self-employed tax actually works in 2026/27
UK self-employed tax has three layers on your profit (revenue minus allowable business expenses): Income Tax, Class 4 NI, and Class 2 NI. The same income tax bands apply as for employees — 0% on the first £12,570, 20% to £50,270, 40% to £125,140, 45% above. The personal allowance tapers between £100,000 and £125,140 (you lose £1 of allowance for every £2 of income over £100,000), creating a 60% effective marginal rate in that band.
Class 4 NI replaces employee NI for the self-employed: 6% on profits between £12,570 and £50,270, then 2% above. Class 2 NI is a flat £3.45/week (£179/year) if you exceed £6,725 profit — technically optional since 2024 but almost always worth paying because it secures State Pension qualifying years. Skipping Class 2 saves £179/year now but costs roughly £290/year of State Pension forever once you retire.
The expenses question — what you can and cannot claim
Allowable expenses are those wholly and exclusively for the business. The most commonly under-claimed expenses I see from self-employed candidates I work with: home office (HMRC allows a flat £6/week for limited home use without records, or proportional bills if you keep them), mileage (45p/mile for the first 10,000 business miles, 25p above), professional subscriptions (relevant industry bodies on the HMRC list 3), and training (relevant to existing skills, not new fields).
Common over-claims that get caught in HMRC enquiries: commuting (ordinary travel from home to a regular workplace doesn't qualify), client entertainment (rarely allowable, even when genuinely for business), regular clothing (only uniform or genuinely protective), and capital items (computers, equipment over £300 often go through capital allowances rather than as expenses). When in doubt, check HMRC's BIM toolkit or use an accountant — penalties for incorrect returns start at 0% if a genuine mistake but rise to 100% of tax for deliberate underclaims.
Payments on account — the second-year shock
UK self-employed tax has a quirk that catches most new sole traders out: payments on account. If your tax bill exceeds £1,000 in a tax year, HMRC requires advance payments for the next year — two instalments of 50% each, due 31 January and 31 July. So a self-employed person who owed £8,000 for 2025/26 pays:
- 31 Jan 2027: £8,000 (2025/26 balance) + £4,000 (50% advance for 2026/27) = £12,000
- 31 Jul 2027: £4,000 (second 50% advance) = £4,000
- 31 Jan 2028: balance for 2026/27 (could be more or less than £8,000 depending on actual) + 50% advance for 2027/28
The £12,000 January 2027 payment is the second-year shock. New self-employed people often don't ring-fence the cash for it because the previous January was just £8,000. The defence is simple: open a savings account on day 1, transfer 25-30% of every invoice to it, and pay the bill from the savings rather than current account. This isn't optional discipline — it's the difference between sustainable self-employment and HMRC penalties.
The £1,000 trading allowance — when to use it
If your self-employed income is under £1,000/year, you don't need to register for self-assessment at all — the £1,000 trading allowance covers it. If your income is between £1,000 and roughly £3,000, you can choose between deducting actual expenses or claiming the £1,000 allowance instead. Above ~£3,000 income, claiming actual expenses is almost always better. Useful for low-volume side hustles (Etsy, Vinted, freelance consulting) where the trading allowance saves the registration overhead.
Sole trader vs limited company — when to switch
The break-even point in 2026/27 is roughly £30,000-£50,000 profit, but the limited company saving has shrunk significantly since the 2023 dividend tax changes. Below £30k profit, sole trader is almost always better — simpler accounting, lower fees, no Companies House filings. Above £80k profit, limited company saves typically £2,000-£4,000 per year in tax through optimal salary + dividend mix, but the savings are eroded by:
- Accountant fees (£800-£2,000/year for a limited company vs £300-£800 for sole trader)
- Companies House filing fees (~£30/year)
- Director's salary requires payroll setup
- Loss of personal allowance simplicity
- Personal liability vs limited liability is the non-tax reason most contractors switch — limited liability matters when contracts have higher exposure
The non-tax reasons (liability protection, professional appearance, easier business borrowing) often matter more than the tax saving for higher-earning self-employed people. If you're cleared £80k profit and considering switching, run our take-home calculator against an optimal salary+dividend split to see the side-by-side difference.
VAT registration — the £90,000 cliff
Once your taxable turnover crosses £90,000 in any rolling 12-month period (the 2024/25 threshold maintained for 2026/27), you must register for VAT within 30 days. From registration, you charge 20% VAT on all invoices to UK customers. For B2B work with VAT-registered customers, this is administrative but commercially neutral — they reclaim the VAT. For B2C work or customers who can't reclaim, your effective price rises 20%, which usually means absorbing some of it as margin reduction.
The cliff effect at £90k creates a real disincentive — going from £89,500 to £91,000 turnover often loses you money once VAT compliance and price impact are factored in. Some self-employed people deliberately stay under the threshold, splitting the work between an accountant tax year (April-March) and a calendar year, or restricting workdays to manage turnover. Above ~£110k turnover, the threshold concern becomes irrelevant — at that scale you're better off going limited company anyway and managing VAT alongside.
Why I built this calculator
Self-employed tax is one of the most-asked questions I get from candidates considering contracting, freelancing, or consulting careers. HMRC's calculator works but doesn't show the moving parts cleanly — you can't easily see why your bill is what it is, or what would change if your profit shifted by £5,000. This calculator breaks down income tax, Class 4 NI, Class 2 NI, and flags the personal allowance taper at £100k+ separately. Pair with the take-home calculator to compare the self-employed tax to the equivalent PAYE outcome.
Common questions
- How much tax do I pay as self-employed in the UK in 2026/27?
- UK self-employed tax in 2026/27 has three components on your profit (income minus allowable expenses): income tax (0% on the first £12,570, 20% from £12,570 to £50,270, 40% from £50,270 to £125,140, 45% above £125,140), Class 4 National Insurance (6% on profits between £12,570 and £50,270, 2% above), and Class 2 NI (£3.45/week if profit above £6,725). For a profit of £40,000 you'd pay roughly £5,486 income tax + £1,648 Class 4 NI + £179 Class 2 NI = £7,313 total. Use the calculator above for your specific situation.
- What is the difference between Class 2 and Class 4 NI?
- Class 2 NI is a flat weekly amount (£3.45/week in 2026/27) you pay if your annual self-employed profit exceeds £6,725 — it's how you build State Pension qualifying years. Class 4 NI is a percentage on profits (6% from £12,570 to £50,270, 2% above) and works like the equivalent of employee NI. Class 2 stopped being mandatory in 2024 — most self-employed people now pay it voluntarily to maintain State Pension qualifying years. If you don't pay Class 2, you risk losing State Pension entitlement years, so it's almost always worth paying.
- What expenses can I claim as self-employed in the UK?
- Allowable business expenses include: office costs (rent, rates, electricity, phone, internet — proportionate if home-based), travel (mileage at 45p/mile for first 10,000 miles, 25p above; train/parking for business journeys), staff costs (salaries, sub-contractors, NI on employees), things you sell (stock, raw materials), legal/financial fees (accountant, professional indemnity insurance, bank charges), marketing (advertising, website, business cards), training (relevant to current role), and clothing (only protective or uniform — regular clothes don't count). You cannot claim: ordinary commuting, fines, entertainment of clients (with rare exceptions), or 'capital' equipment which goes through capital allowances instead.
- How do payments on account work for self-employed?
- If your tax bill exceeds £1,000 in a tax year, HMRC requires 'payments on account' for the next year. These are two payments of 50% each of your previous year's tax bill, due on 31 January and 31 July. So if you owed £8,000 for 2025/26, you pay £4,000 on 31 January 2027 and £4,000 on 31 July 2027 — both as advance payments towards your 2026/27 bill. Then any difference (a 'balancing payment') is due the following 31 January. This catches a lot of new self-employed people in their second year because the January 2027 payment is the £8,000 owed plus £4,000 advance for 2026/27 = £12,000 in one hit. Plan accordingly.
- Do I need to register for VAT as self-employed?
- You must register for VAT if your taxable turnover (not profit, total revenue) exceeds £90,000 in any rolling 12-month period — the 2024/25 threshold maintained for 2026/27. You can register voluntarily below this if it benefits you (mostly if your customers are VAT-registered businesses who can reclaim it, or if you have lots of input VAT to reclaim on expenses). Once VAT-registered, you charge 20% VAT on your invoices and pay it to HMRC quarterly minus VAT on your business expenses. Most self-employed people in the £30k-£80k profit range stay below the threshold and avoid the administrative overhead.
- When do I pay self-employed tax in the UK?
- UK self-employed tax follows the self-assessment cycle. The tax year runs 6 April to 5 April. You file the previous year's return online by 31 January (paper deadline 31 October). The tax owed for that year is paid by 31 January, alongside the first payment on account for the new year (50% of last year's tax). The second payment on account is due 31 July. So a typical year has two payment dates: 31 January (last year's balance + 50% advance) and 31 July (50% advance). Late payment incurs interest at 7.75% (2026/27 rate) plus surcharges starting at 5% after 30 days late.
- Should I be a sole trader or limited company?
- Below ~£30k profit, sole trader is almost always better — simpler accounting, lower fees, no Companies House filings. Between £30k-£50k, the maths is closer; some prefer limited company for liability protection and dividend tax efficiency. Above £50k profit, limited companies often save tax through salary + dividend mix, but the savings shrunk significantly since the 2023 dividend tax changes — typical net saving is £2-5k/year on £80k profit, less than the £1-2k of accountant fees. The non-tax reasons (limited liability, professional appearance, easier to get business loans) often matter more than the tax saving for high earners.