If you work for yourself, there's no payroll department quietly taking tax off before the money hits your account. You get paid in full, and at some point HMRC wants its share. The hard part is knowing how much to set aside before that bill lands.
This guide breaks down exactly what a self-employed sole trader pays in 2026/27: income tax, plus the two kinds of National Insurance that apply to your profits. We'll walk through the rates, show you two fully worked examples, and give you a simple way to estimate your own bill.
It's written for sole traders and the self-employed in England, Wales and Northern Ireland. Scotland sets its own income tax rates, so the figures here don't apply north of the border.
What taxes do the self-employed actually pay?
As a sole trader, you're taxed on your profit, not your turnover. Profit is what's left after you deduct allowable business expenses from your income.
On that profit you can face three charges:
- Income tax, at the same rates an employee pays.
- Class 4 National Insurance, a percentage of your profit.
- Class 2 National Insurance, which since April 2024 most people no longer physically pay (more on that below).
There's no separate "self-employment tax" rate in the UK. It's just income tax plus NI, calculated through your Self Assessment return. The good news is that the maths is more predictable than it first looks once you see the bands.
How is income tax calculated on self-employment?
Income tax works in slices. The first slice of income is tax-free, then each band above it is taxed at a higher rate. Here are the rates for 2026/27.
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The Personal Allowance is the amount you can earn before any income tax is due. For 2026/27 it's £12,570.
One catch worth knowing: if your total income goes over £100,000, the Personal Allowance shrinks by £1 for every £2 above £100,000, and disappears entirely at £125,140. Most sole traders won't hit that, but it's worth flagging if you're having a strong year.
If your self-employment income is small, you may also be able to use the £1,000 trading allowance instead of claiming expenses. Earn under £1,000 from self-employment in the year and you usually don't even need to report it.
What National Insurance do the self-employed pay in 2026/27?
This is where self-employment differs from being an employee. You pay National Insurance through two classes.
Class 4 National Insurance
Class 4 is the main one, charged as a percentage of your profits.
| Profit band | Class 4 rate (2026/27) |
|---|---|
| Up to £12,570 (Lower Profits Limit) | 0% |
| £12,570 to £50,270 (Upper Profits Limit) | 6% |
| Over £50,270 | 2% |
So you pay nothing on the first £12,570 of profit, 6% on profit between £12,570 and £50,270, and 2% on anything above £50,270.
Class 2 National Insurance
Class 2 used to be a flat weekly charge. From 6 April 2024 it's no longer payable as a mandatory weekly amount for most self-employed people.
If your profits are at or above the Small Profits Threshold of £7,105 for 2026/27, Class 2 is treated as paid. You owe nothing, but your National Insurance record is still protected, which matters for your State Pension and certain benefits.
If your profits are below £7,105, you can choose to pay Class 2 voluntarily at £3.65 a week for 2026/27 to keep building your record. That's optional, not a bill.
Worked example: tax on £45,000 of profit
Illustrative example. Tom is a self-employed electrician trading as a sole trader. After deducting allowable expenses, his profit for 2026/27 is £45,000. He has no other income and lives in England.
Income tax
- Tax-free Personal Allowance: £12,570
- Taxable profit: £45,000 - £12,570 = £32,430
- All of this falls in the basic rate band, taxed at 20%: £32,430 x 20% = £6,486
Class 4 National Insurance
- Profit above the £12,570 Lower Profits Limit: £45,000 - £12,570 = £32,430
- This is all below the £50,270 Upper Profits Limit, so taxed at 6%: £32,430 x 6% = £1,945.80
Class 2 National Insurance
- Profit of £45,000 is above the £7,105 Small Profits Threshold, so Class 2 is treated as paid: £0
Total tax and NI: £6,486 + £1,945.80 = £8,431.80
That leaves Tom with £36,568.20 after tax and NI on his £45,000 profit. As a rough rule of thumb, he'd want to set aside a bit under a fifth of his profit for the bill.
Worked example: tax on £70,000 of profit
Illustrative example. Priya runs a self-employed consultancy as a sole trader. Her 2026/27 profit after expenses is £70,000, with no other income, and she lives in Wales.
Income tax
- Tax-free Personal Allowance: £12,570
- Taxable profit: £70,000 - £12,570 = £57,430
- Basic rate: £37,700 x 20% = £7,540
- Higher rate: the remaining £19,730 (£57,430 - £37,700) x 40% = £7,892
- Income tax total: £7,540 + £7,892 = £15,432
Class 4 National Insurance
- 6% on profit from £12,570 to £50,270 (a £37,700 band): £37,700 x 6% = £2,262
- 2% on profit above £50,270: £19,730 x 2% = £394.60
- Class 4 total: £2,262 + £394.60 = £2,656.60
Class 2 National Insurance
- Profit is well above £7,105, so Class 2 is treated as paid: £0
Total tax and NI: £15,432 + £2,656.60 = £18,088.60
Notice how Priya's effective rate climbs once she crosses into the higher rate band at £50,270. That's the moment a lot of growing sole traders start asking whether a different structure might suit them better.
How can I estimate my own tax bill?
You can get a quick estimate with three steps.
- Work out your profit. Take your total self-employment income for the year and subtract your allowable business expenses.
- Apply income tax. Knock off the £12,570 Personal Allowance, then tax the rest at 20% up to £50,270 of income, and 40% above that.
- Add Class 4 NI. 6% on profit between £12,570 and £50,270, then 2% on anything above £50,270.
For most sole traders earning under £50,270, the total tends to land around 26% of the profit above the Personal Allowance (20% income tax plus 6% Class 4). It's a useful sense-check, but it's not a substitute for running the real numbers.
If you'd rather not do the arithmetic by hand, our self-employed tax calculator does the income tax and Class 4 NI in one go, and our National Insurance calculator lets you see the NI side on its own.
Want a hand getting it right? Zmartly handles Self Assessment for sole traders and tradespeople across the UK. We work out exactly what you owe, claim every expense you're entitled to, and file on time. Book a free 20-minute call with a Zmartly accountant and stop guessing at your tax bill.
When do I actually have to pay?
Self-employed tax and Class 4 NI are paid through Self Assessment, not in real time. The key dates are:
- 5 October following the end of the tax year: register for Self Assessment if it's your first year.
- 31 January following the tax year: file your online return and pay the balancing amount.
- 31 July: a second payment on account, if you make them.
Payments on account can catch first-timers out. HMRC asks you to pay towards next year's bill in two instalments, each normally half of last year's bill. So your first January can feel like paying one and a half years' tax at once. Budgeting for it early makes all the difference.
If you're just starting out, our guidance for sole traders and tradesmen walks through registration, record-keeping and what to set aside.
Frequently asked questions
Do I pay tax on my turnover or my profit?
You pay tax on your profit, which is your income minus allowable business expenses. Keeping clean records of your expenses directly reduces the profit you're taxed on, so it pays to track them carefully throughout the year.
What is the tax-free allowance for the self-employed in 2026/27?
The Personal Allowance is £12,570 for 2026/27, so the first £12,570 of profit is free of income tax. There's also a separate £1,000 trading allowance you can use instead of deducting expenses if your self-employment income is small.
Do I still have to pay Class 2 National Insurance?
For most self-employed people, no. Since 6 April 2024 Class 2 hasn't been a mandatory weekly charge. If your profits reach the £7,105 Small Profits Threshold for 2026/27, Class 2 is treated as paid and your NI record stays protected. Below that, you can pay voluntarily at £3.65 a week if you want to keep building your record.
How much should I set aside for tax as a sole trader?
A practical starting point for profits under £50,270 is around a quarter to a fifth of your profit, because the combined income tax and Class 4 NI rate in the basic band is about 26% on profit above the Personal Allowance. Set the money aside in a separate account as you earn it, and don't forget payments on account in your first full year.
When is my self-employed tax due?
You file your online Self Assessment return and pay any balancing amount by 31 January following the tax year. If you make payments on account, a second instalment is due by 31 July. First-time filers must also register for Self Assessment by 5 October following the end of their first tax year.
