Income Tax, Class 4 NI & Payments on Account — updated for 2026/27
Where do you live?
£
£
£
I have other employed income (PAYE)
Affects personal allowance allocation and NI calculations
£
First year of self-employment
Affects payment on account calculation — no prior year bill exists
Take-home profit
£0
after all tax & NI
Total tax & NI
£0
this tax year
Taxable profit
£0
after expenses
Full breakdown
Item
Amount
Notes
Payments on account — cash flow planning
Important: This calculator is for guidance only. It assumes the standard personal allowance (£12,570) and does not account for capital allowances, overlap relief, averaging claims, or other individual circumstances. Student loan repayments for self-employed people are paid via Self Assessment — not automatically deducted. Always verify your tax liability with a qualified accountant or HMRC. Rates are current for the 2026/27 tax year.
As a self-employed sole trader in the UK, you pay income tax and National Insurance through Self Assessment rather than PAYE. Unlike employees, you are responsible for calculating, saving, and paying your own tax — and the deadlines can catch people out. Your tax is based on your taxable profit (turnover minus allowable expenses), not your turnover. On top of your annual tax bill, HMRC requires most self-employed people to make advance payments called payments on account — essentially paying next year's estimated tax bill in two instalments. This free calculator works out exactly what you owe in income tax, Class 4 National Insurance, and what your payments on account will be — so you can plan your cash flow with confidence.
Frequently Asked Questions
What tax do self-employed people pay in the UK?
Self-employed sole traders pay Income Tax and Class 4 National Insurance on their taxable profits through Self Assessment. Income tax rates are the same as for employees — 20% basic rate, 40% higher rate, 45% additional rate in England, Wales and Northern Ireland (Scotland has different rates). Class 4 NI is charged at 6% on profits between £12,570 and £50,270, and 2% above £50,270. Unlike employees, self-employed people do not pay Class 1 NI — instead they pay the lower Class 4 rate. Class 2 NI was abolished for most self-employed people from April 2024.
What are payments on account and why are they so confusing?
Payments on account are advance payments towards your next year's tax bill. If your Self Assessment tax bill exceeds £1,000, HMRC requires you to pay 50% of that bill in advance on 31st January and another 50% on 31st July. This means in your first year of significant trading, you could owe up to 150% of your annual tax bill in one January — your actual bill plus the first payment on account for next year. This catches many new sole traders completely off guard. Setting aside 25–30% of your income each month for tax is the simplest way to avoid a cash flow shock.
What counts as an allowable business expense?
Allowable expenses reduce your taxable profit and therefore your tax bill. Common allowable expenses include: office costs (stationery, phone, broadband), travel costs (fuel, public transport — but not commuting), clothing (uniforms or protective gear only), staff costs, marketing and advertising, accountancy fees, professional subscriptions, and equipment (subject to capital allowances). You cannot claim clothing for everyday wear, personal expenses, or entertainment costs. If you work from home, you can claim a proportion of household bills or use HMRC's simplified flat rate. Always keep receipts as HMRC may ask for evidence.
When are the Self Assessment deadlines?
There are four key dates to remember: 5 October — register with HMRC as self-employed if you haven't already (deadline is 5 October after the end of the tax year you started). 31 January — submit your online tax return and pay your tax bill plus your first payment on account for the following year. 31 July — pay your second payment on account. 31 October — deadline for paper tax returns (most people file online). Missing the 31 January deadline triggers an automatic £100 penalty, with further penalties the longer you delay.
Do I need to pay Class 2 National Insurance?
From April 2024, Class 2 NI is no longer compulsory for most self-employed people. If your profits are above the Small Profits Threshold (£7,105 for 2026/27), you automatically receive a qualifying year towards your State Pension without paying Class 2. If your profits are below £7,105, you can choose to pay voluntary Class 2 contributions at £3.65 per week to protect your National Insurance record and State Pension entitlement. This is significantly cheaper than Class 3 voluntary contributions (£18.40 per week), so it's usually worth paying if your profits are low.
How do pension contributions affect my tax bill?
Pension contributions are one of the most tax-efficient ways to reduce your self-employment tax bill. Contributions to a personal pension or SIPP reduce your adjusted net income, which means you pay less income tax. For a higher-rate taxpayer, a £1,000 pension contribution effectively costs only £600 after tax relief. Note that pension contributions do not reduce your Class 4 NI liability — only income tax. If your income is between £100,000 and £125,140, making pension contributions can restore your personal allowance and save tax at an effective rate of 60%.
What is Making Tax Digital and does it affect me?
Making Tax Digital (MTD) for Income Tax started in April 2026 for self-employed people and landlords with income over £50,000. From April 2027 it will extend to those with income over £30,000. Under MTD, you must keep digital records using approved software and submit quarterly updates to HMRC, plus an annual final declaration — replacing the traditional annual Self Assessment return. If your income is below these thresholds you are not yet affected, but it's worth preparing now by using accounting software to track your income and expenses digitally.