Self-Employed Tax UK: What You Actually Owe
Quick answer
A sole trader pays Income Tax and Class 4 National Insurance on profits. Your marginal rate in the basic-rate band is not 20% but 26%: 20% Income Tax plus 6% Class 4 NIC. The first GBP 12,570 of profit is tax-free under the Personal Allowance.
Self-employed tax on GBP 45,000 profit (2026/27, England/Wales/NI)
| Line | Amount |
|---|---|
| Profit for the year | GBP 45,000 |
| Less Personal Allowance (tax-free) | - GBP 12,570 |
| Income taxed at basic rate (20%) | GBP 32,430 |
| Income Tax due | GBP 6,486.00 |
| Class 4 NIC at 6% (profits GBP 12,570 to GBP 50,270) | GBP 1,945.80 |
| Class 2 NIC (treated as paid above GBP 7,105) | GBP 0 |
| Total Income Tax plus Class 4 NIC | GBP 8,431.80 |
| Effective rate on GBP 45,000 | 18.7% |
| Marginal rate on the next pound | 26% |
Self-employed tax in the UK is not one tax, it is two stacked on top of each other: Income Tax and Class 4 National Insurance, both charged on your profit. That is why "self-employed tax is 20%" is misleading. In the basic-rate band you pay 20% Income Tax and 6% Class 4 NIC on the same pound of profit, so your real marginal rate is 26%. The table above takes a GBP 45,000 profit line by line to a single final bill of GBP 8,431.80, which is the one number gov.uk never gives you in one place.
What you are taxed on is profit, not turnover: income minus allowable expenses. Below GBP 1,000 of self-employment income the trading allowance covers you and there is nothing to report. Above it, your GBP 12,570 Personal Allowance shelters the first slice, then 20% Income Tax runs to GBP 50,270, 40% to GBP 125,140, and 45% above. Class 4 NIC sits alongside at 6% up to GBP 50,270 and 2% beyond. Class 2 NIC is no longer charged as a flat fee: once profit passes GBP 7,105 it is treated as paid, which still protects your State Pension record. (Scotland sets its own Income Tax bands, so a Scottish sole trader's Income Tax differs, though Class 4 NIC is the same UK-wide.)
The deadlines are where first-year traders get caught. You must register for Self Assessment by 5 October after the tax year you started. You file and pay online by 31 January. The shock is payments on account: if your bill tops GBP 1,000, that 31 January payment also includes 50% of next year's estimated bill in advance, with a second 50% due by 31 July, so your first real bill can be 150% of the tax you expected.
New to this? Start with how to register as a sole trader and the wider going self-employed guide. Once you are trading, the Self Assessment tax return guide covers filing, side hustle tax goes deeper on the GBP 1,000 trading allowance, and limited company vs sole trader weighs up incorporating. To sense-check the numbers against an employed salary, run the take-home pay calculator.
Figures are for the 2026/27 tax year and are taken from gov.uk; tax rules and thresholds can change. This is general information, not financial or tax advice.
Frequently asked questions
How much tax do I pay if self-employed?
You pay Income Tax and Class 4 National Insurance on your profit (income minus allowable expenses). On GBP 45,000 of profit in 2026/27 that is GBP 6,486 Income Tax plus GBP 1,945.80 Class 4 NIC, a total of GBP 8,431.80, or about 18.7% of profit. The first GBP 12,570 is tax-free.
Is self-employed tax still 20%?
The basic Income Tax rate is 20%, but that is not your real rate. Class 4 National Insurance adds 6% on the same band of profit, so a basic-rate sole trader pays 26% on each extra pound earned, not 20%. Above GBP 50,270 the combined marginal rate is 42% (40% Income Tax plus 2% Class 4 NIC).
How much tax-free money can I earn self-employed?
Two allowances stack. The GBP 1,000 trading allowance means you do not pay tax or report self-employment income at or below GBP 1,000. Above that, your GBP 12,570 Personal Allowance covers the first slice of profit, so no Income Tax is due until profit passes GBP 12,570.
How much tax do I pay as a sole trader?
The same as any self-employed person: Income Tax at 20%, 40% or 45% by band, plus Class 4 NIC at 6% on profits from GBP 12,570 to GBP 50,270 and 2% above. Class 2 NIC is treated as paid once profits pass GBP 7,105, so most sole traders pay nothing extra for it.
What are the self-employed National Insurance rules now?
Class 4 NIC is 6% on profits between GBP 12,570 and GBP 50,270, then 2% above. Flat-rate Class 2 NIC is no longer charged: if your profits are above GBP 7,105 it is treated as paid automatically, protecting your State Pension record. Below that you can pay Class 2 voluntarily at GBP 3.65 a week.
Sources
Save these facts
View the key facts as a shareable graphic.
General information, not financial advice. Tax rules and figures can change; check the current position on gov.uk before acting.