Self-employed tax calculator

Sole trader tax in 2026/27: the two bills

Self-employed tax runs on profit, your income after allowable expenses, and it arrives as two charges on one Self Assessment bill. Income tax uses the same bands as employees: nothing on the first £12,570, then 20%, 40% and 45% as the slices climb. Class 4 National Insurance adds 6% on profit between £12,570 and £50,270 and 2% above that. Class 2 no longer costs anything, and your State Pension record is protected once profit passes £7,105. As a single line: sole trader take-home = profit − income tax − Class 4 NI, with profit meaning income after allowable expenses.

On £40,000 of profit the two bills come to £7,132, leaving £32,868, so a sensible rule of thumb at that level is to set aside 18p of every pound as you earn it. By £55,000 of profit the set-aside is nearer 21p, because a growing slice of income sits in the 40% band. The calculator gives you the exact percentage for your own figure, which beats folklore.

Payments on account, the first-year ambush

The bill lands in one place, 31 January, and in your first profitable year it lands twice over. HMRC collects the year you've finished plus 50% of next year's bill in advance, then another 50% in July. A trader owing £7,132 for their first year actually pays £10,698 that January. Nothing extra is being charged, you're simply prepaying, but the cashflow shock is real and it catches thousands of people every winter. The calculator shows your January figure with payments on account included, so it can't sneak up on you.

Where sole traders go wrong

The commonest error is budgeting on turnover when tax runs on profit, or its evil twin, spending gross invoices as they arrive and meeting January with nothing put by. Sneakier: the VAT registration test uses any rolling 12 months of turnover, never the tax year, so a strong autumn can carry you past the £90,000 line while you're still counting April to April. Miss it and HMRC wants the VAT you should have been charging from the date you crossed, collected or not.

Money gets left on the table too. Simplified expenses give 45p a mile for the first 10,000 business miles and flat monthly amounts for working from home, no receipt shoebox required. A personal pension contribution earns relief at your marginal rate and trims adjusted net income, which starts to matter again near £100,000. And if this is your first year, tell HMRC by 5 October after the end of the tax year you started in: registering late risks penalties on a bill you were always going to pay anyway.

Worth checking alongside

If you're weighing self-employment against staying on payroll, the employed vs self-employed calculator finds the day rate that genuinely replaces a salary once holiday and employer pension are counted. And from April 2026 sole traders with gross income over £50,000 keep digital records and file quarterly under Making Tax Digital: the MTD checker tells you your start date from your own numbers.