Your Self-Employed Income
Enter your profit details on the left and click Calculate Tax to see your results.
How Self-Employed Tax Works
When you are self-employed in the UK, your tax bill is made up of three components: Income Tax, Class 2 National Insurance and Class 4 National Insurance. Unlike employees whose tax is deducted at source through PAYE, self-employed people pay their tax through the Self Assessment system — filing a tax return each year by 31 January and paying the resulting bill.
Income Tax
Income Tax is calculated on your taxable profits (after allowable expenses and any pension contributions) using the same bands that apply to employed workers. You receive a Personal Allowance of £12,570 for 2025/26 — income below this threshold is tax-free. Above that, you pay 20% (basic rate), 40% (higher rate above £50,270 total income) and 45% (additional rate above £125,140). If your total income exceeds £100,000, your Personal Allowance is tapered by £1 for every £2 over that threshold.
Class 2 National Insurance
Class 2 NI is a flat weekly charge of £3.45 (2025/26), totalling £179.40 per year. You pay this if your profits are at or above the Small Profits Threshold of £6,845. Class 2 NI counts towards your State Pension and certain benefits entitlements — it is one of the most cost-effective contributions you can make.
Class 4 National Insurance
Class 4 NI is earnings-related and applies to your self-employed profits. For 2025/26: 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Unlike Class 2, Class 4 does not count towards your State Pension — it is purely a tax on earnings.
Allowable Expenses
One of the key advantages of self-employment is the ability to deduct allowable business expenses from your income before tax is calculated. Common allowable expenses include: office costs, travel (excluding commuting), equipment, professional fees, advertising, and a proportion of home costs if you work from home. Only expenses incurred wholly and exclusively for business purposes qualify. This is why the profit figure you enter in this calculator should be your profit after deducting legitimate business costs.
Payment on Account
HMRC's Payment on Account system means you often have to pay your tax bill in advance. If your Self Assessment bill exceeds £1,000, HMRC requires you to make two advance payments towards the following year's tax — each equal to 50% of your current year bill — due on 31 January and 31 July. This can create a cash flow shock in your first years of self-employment, as you effectively pay 150% of your tax bill in January. Budget for this from the start.
Pension Contributions
Self-employed pension contributions are highly tax-efficient. Contributions to a personal pension (SIPP or similar) reduce your income for Income Tax purposes, attracting 20–45% tax relief depending on your rate band. However, pension contributions do not reduce the profit figure used to calculate Class 4 NI — only your Income Tax liability falls. This calculator applies pension contributions to your Income Tax calculation only.
Worked Examples
These examples assume England/Wales taxpayer, no other income and no pension contributions for 2025/26.
£20,000 profit — starting out
£40,000 profit — established freelancer
£75,000 profit — higher rate taxpayer
2025/26 Self-Employed Tax Rates at a Glance
| Component | Threshold | Rate | Notes |
|---|---|---|---|
| Income Tax — Personal Allowance | Up to £12,570 | 0% | Tapered above £100k income |
| Income Tax — Basic Rate | £12,571–£50,270 | 20% | England & Wales |
| Income Tax — Higher Rate | £50,271–£125,140 | 40% | England & Wales |
| Income Tax — Additional Rate | Above £125,140 | 45% | England & Wales |
| Class 2 NI | Profits ≥ £6,845/yr | £3.45/week | £179.40/year flat |
| Class 4 NI — Main Rate | £12,571–£50,270 | 6% | On profit only |
| Class 4 NI — Upper Rate | Above £50,270 | 2% | On profit only |
| VAT Registration Threshold | Turnover ≥ £90,000 | Mandatory | Based on turnover, not profit |
Important Considerations
HMRC requires you to pay 50% of your prior year Self Assessment bill on 31 January and a further 50% on 31 July — in advance — as payments on account towards the following year's tax. In your first year of self-employment this is in addition to your actual tax bill, meaning January can be a very large payment. Budget for this from day one.
VAT registration is mandatory once your business turnover (not profit) exceeds £90,000 in any rolling 12-month period. Once registered, you charge VAT to customers and pay the difference to HMRC. This does not affect your Income Tax or NI liability but does affect your pricing, invoicing and cash flow — factor this in if you are approaching the threshold.
Self-employed workers do not benefit from employer pension contributions, but personal pension contributions attract generous tax relief. Contributing to a SIPP or personal pension reduces your income for Income Tax purposes at your marginal rate — 20% to 45% relief. The government automatically adds basic rate relief at source. Higher rate taxpayers can claim the additional relief through Self Assessment.