If you work for yourself, no one deducts tax from your income before it reaches you. You work out what you owe, set the money aside, and pay HMRC yourself. So the first question most sole traders ask is a fair one: how much of what I earn actually ends up as tax?
This guide answers that for the 2025/26 tax year. We cover the two charges that apply to nearly every sole trader, Income Tax and Class 4 National Insurance, with worked examples you can follow line by line. We also cover Class 2, what you can claim to bring your bill down, and the deadlines that matter.
It's written for sole traders and freelancers in England, Wales and Northern Ireland. Scotland sets its own Income Tax bands, so the figures here don't apply north of the border.
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How much tax does a self-employed person pay in 2025/26?
As a sole trader, you pay tax on your profit, not your turnover. Profit is what's left after you take your allowable business expenses off your income.
Two charges apply to that profit:
- Income Tax, on profit above your tax-free Personal Allowance.
- Class 4 National Insurance, on profit above a similar threshold.
There's also Class 2 National Insurance, but for most people it's now handled automatically and costs nothing. We explain that below.
You don't get a separate "self-employment tax" in the UK the way the United States does. When people use that phrase here, they usually mean National Insurance, which sits on top of Income Tax. You pay both, and they're worked out separately.
If your turnover passes the VAT registration threshold of £90,000 in any rolling 12-month period, you'll also need to register for VAT. That's a separate subject; you can read our notes on it through our self-assessment services page.
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What are the Income Tax rates for the self-employed?
Income Tax is charged on your profit once it goes above the Personal Allowance, the amount you can earn before any Income Tax is due. For 2025/26 the Personal Allowance is £12,570.
Above that, your profit is taxed in bands.
| Band | Taxable income | Income Tax 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% |
A few things to keep in mind:
- The rates apply to your total taxable income for the year, not just your self-employed profit. If you also have a salary, a pension or rental income, it all stacks up together.
- Once your income passes £100,000, your Personal Allowance shrinks by £1 for every £2 you earn above that, and it disappears entirely at £125,140.
- These are the rates for England, Wales and Northern Ireland. Scotland is different.
Illustrative example: a sole trader with £30,000 profit
Say Maya runs a design business and her profit for the year is £30,000.
- Profit: £30,000
- Less Personal Allowance: £12,570
- Taxable income: £17,430
- Income Tax: £17,430 x 20% = £3,486
All of her taxable profit sits inside the basic rate band, so it's all charged at 20%.
Illustrative example: a sole trader with £60,000 profit
Now take Tom, a freelance consultant with £60,000 profit. He crosses into the higher rate.
- Profit: £60,000, less the £12,570 allowance, leaves £47,430 taxable.
- Basic rate: £37,700 x 20% = £7,540
- Higher rate: the remaining £9,730 x 40% = £3,892
- Income Tax: £11,432
Only the slice of income above £50,270 is taxed at 40%. The 40% rate doesn't drag everything up with it, which is a common worry that's worth clearing up.
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How does National Insurance work for sole traders?
National Insurance pays towards your State Pension and certain benefits. As a sole trader you can come across two classes: Class 2 and Class 4.
Class 2 National Insurance
Since 6 April 2024, Class 2 is no longer charged as a flat weekly amount. If your profit is at or above the Small Profits Threshold, your National Insurance record is treated as maintained automatically, so you keep your State Pension entitlement without paying anything.
For 2025/26 the Small Profits Threshold is £6,845.
If your profit is below £6,845, you can still choose to pay Class 2 voluntarily to protect your State Pension record. The voluntary rate for 2025/26 is £3.50 a week.
Class 4 National Insurance
This is the charge most self-employed people will actually pay. It applies to your profit in bands.
| Profit band | Class 4 rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 to £50,270 | 6% |
| Above £50,270 | 2% |
The main Class 4 rate is 6% for 2025/26. There's no upper cap; the 2% rate keeps applying to all profit above £50,270.
Illustrative example: Class 4 on £30,000 and £60,000
For Maya, with £30,000 profit:
- (£30,000 minus £12,570) x 6% = £17,430 x 6% = £1,046 (rounded)
For Tom, with £60,000 profit:
- Main rate: £37,700 x 6% = £2,262
- Higher slice: (£60,000 minus £50,270) x 2% = £9,730 x 2% = £195
- Total Class 4: £2,457 (rounded)
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How do I calculate my self-employed tax step by step?
Here's the order to work through it. You can use our self-employed tax calculator to do the sums for you, but it's worth understanding what's going on underneath.
- Add up your income for the tax year (6 April to 5 April).
- Take off your allowable expenses to get your profit.
- Income Tax: subtract the £12,570 Personal Allowance, then apply 20%, 40% or 45% to the bands above it.
- Class 2 NI: usually nothing to pay if your profit is at or above £6,845.
- Class 4 NI: 6% on profit between £12,571 and £50,270, then 2% above that.
- Add Income Tax and Class 4 together for your total bill.
Illustrative example: £40,000 income, £10,000 expenses
Imagine a tradesperson, Sam, with £40,000 of income and £10,000 of allowable expenses.
| Step | Figure |
|---|---|
| Income | £40,000 |
| Less expenses | £10,000 |
| Profit | £30,000 |
| Income Tax (£17,430 x 20%) | £3,486 |
| Class 2 NI | £0 |
| Class 4 NI (£17,430 x 6%) | £1,046 |
| Total tax | £4,532 |
That leaves Sam with £25,468 after tax, on £30,000 of profit. The effective rate, the total tax as a share of profit, is about 15%.
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Is National Insurance on top of Income Tax?
Yes. Income Tax and National Insurance are two separate charges, and you pay both on the same profit.
They're worked out independently:
- Income Tax uses the Personal Allowance and the 20/40/45% bands.
- Class 4 NI uses its own thresholds and the 6% and 2% rates.
For Maya's £30,000 of profit, that's £3,486 of Income Tax plus £1,046 of Class 4 NI, a combined £4,532. The two charges fund different things: National Insurance counts towards your State Pension and benefits, while Income Tax goes into general government spending. That's why you see both.
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What expenses can I claim to reduce my tax?
Your tax is charged on profit, so every pound of genuine business cost you record reduces what you pay. The rule is that an expense must be incurred wholly and exclusively for your business. If something is part personal, you claim only the business share.
Common allowable expenses for sole traders include:
- Working from home: either a flat-rate simplified amount or a fair proportion of your actual household costs.
- Travel: business mileage at HMRC's approved rates of 45p a mile for the first 10,000 business miles in the year and 25p a mile after that, or your actual vehicle running costs.
- Equipment and tools: computers, software and machinery. Most qualifying plant and machinery can be claimed in full in the year you buy it through the Annual Investment Allowance, which covers up to £1,000,000 of spend a year.
- Professional costs: accountancy fees, professional indemnity insurance, and subscriptions to a relevant professional body.
- Premises: rent, business rates and utilities for a workshop, studio or office.
- Marketing: your website, online advertising and printed materials.
Some things you cannot claim: ordinary commuting, client entertaining, fines and penalties, and the personal share of any mixed-use cost.
Keep your receipts, invoices and bank statements. HMRC expects you to hold records for at least five years after the 31 January filing deadline.
Want to be sure you're claiming everything you're entitled to? Book a free 20-minute call with a Zmartly accountant and we'll review your expenses before you file. Get in touch.
If you're weighing up whether incorporating would suit you better, our small business accounting page walks through the trade-offs without the jargon.
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When do I have to pay, and what are the deadlines?
Self-employed tax is reported through Self Assessment. The dates to know:
- Register for Self Assessment by 5 October following the end of the tax year you started.
- Paper tax return: midnight on 31 October after the tax year ends.
- Online tax return: midnight on 31 January after the tax year ends.
- Pay your tax: the balancing payment is also due by 31 January.
If your bill is large enough, you'll also make payments on account, advance instalments towards the next year's tax, due on 31 January and 31 July.
So for the 2025/26 tax year, which ends on 5 April 2026, your online return and payment are due by 31 January 2027.
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Frequently asked questions
What is the tax rate for the self-employed in the UK for 2025/26?
You pay Income Tax on profit above the £12,570 Personal Allowance, at 20% up to £50,270, 40% up to £125,140 and 45% above that. On top of that you pay Class 4 National Insurance at 6% on profit between £12,571 and £50,270, and 2% on profit above £50,270. Class 2 National Insurance is usually nothing to pay if your profit is at or above £6,845.
How do I work out my self-employed tax bill?
Take your income, subtract your allowable expenses to get your profit, then apply the Income Tax bands above the £12,570 allowance and add Class 4 National Insurance at 6% and 2%. For example, on £30,000 of profit you'd pay £3,486 Income Tax and £1,046 Class 4 NI, a total of £4,532.
Is National Insurance separate from Income Tax?
Yes. They're two different charges on the same profit, worked out separately, and you pay both. National Insurance counts towards your State Pension and certain benefits, while Income Tax funds general public spending.
Do I still have to pay Class 2 National Insurance?
For most sole traders, no. Since 6 April 2024, Class 2 is no longer charged as a flat weekly amount, and your National Insurance record is treated as maintained automatically if your profit is at or above the Small Profits Threshold of £6,845. If your profit is below that, you can pay Class 2 voluntarily at £3.50 a week to protect your record.
What expenses can I claim as a sole trader?
Any cost incurred wholly and exclusively for your business: working-from-home costs, business mileage at 45p a mile for the first 10,000 miles then 25p, equipment, accountancy fees, professional insurance, premises costs and marketing. You can't claim ordinary commuting, client entertaining, fines, or the personal share of mixed-use costs.
When is my self-employed tax due?
File your online Self Assessment return and pay any tax owed by midnight on 31 January following the end of the tax year. You may also owe payments on account on 31 January and 31 July. For 2025/26, the online filing and payment deadline is 31 January 2027.
