How much tax will you pay as a sole trader?
Enter your takings and expenses and see the Income Tax and National Insurance on your profit, what is left after tax, and whether payments on account will follow. For 2025-26, and for 2026-27, the first year of Making Tax Digital for Income Tax.
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Based on the gov.uk rates
What a sole trader pays
You pay tax on your profit, not your takings: what you earned in the tax year less your allowable business expenses. That profit is added to any other income, such as pay from a job, and the first £12,570 is usually tax free.
On top of Income Tax there is Class 4 National Insurance on the profit itself: 6% between £12,570 and £50,270, and 2% above that. Pay from a job does not count towards it, because National Insurance on wages is taken through PAYE.
Class 2 National Insurance is no longer charged. Since 6 April 2024 the self-employed do not have to pay it, although someone with low profits can choose to pay it voluntarily to protect their State Pension record.
How and when you pay
Keep your records
Record your income and expenses through the year. Under Making Tax Digital you also send HMRC a quarterly update of them.
File after 5 April
Once the tax year ends, file your Self Assessment return, or your final declaration if you are in Making Tax Digital.
Pay by 31 January
The bill for the year is due by 31 January after it ends, the same day as the return.
Payments on account
If the bill is £1,000 or more, HMRC usually asks for two advance payments towards next year, each half this year's bill, on 31 January and 31 July.
What this estimate leaves out
Scottish Income Tax
It uses the rates for England, Wales and Northern Ireland. Scottish taxpayers pay different Income Tax rates and bands. Class 4 is the same across the UK.
Student loans
Student loan or postgraduate loan repayments collected through Self Assessment are added to the bill.
Savings, dividends and rent
Interest, dividends and rental income have their own allowances and rates. For rent, use the rental income tax calculator.
Reliefs and losses
Pension contributions, Gift Aid, Marriage Allowance and losses from earlier years all lower the bill and are not included.
Letting property as well? Try the rental income tax calculator.
Straight answers
How much tax does a sole trader pay?
Income Tax on your profit at 20%, 40% or 45% once it and any other income pass the £12,570 Personal Allowance, plus Class 4 National Insurance of 6% on profit between £12,570 and £50,270 and 2% above. On a £30,000 profit with no other income that is £4,531.80 in all.
Do sole traders still pay Class 2 National Insurance?
No. Since 6 April 2024 the self-employed no longer have to pay Class 2. Someone whose profits are below the small profits threshold can still choose to pay it voluntarily, to keep building their State Pension record, but it is not part of the bill.
What are payments on account?
Advance payments towards next year's bill. If your Self Assessment bill is £1,000 or more, and less than 80% of your tax was taken at source, HMRC asks for two payments each worth half this year's bill, on 31 January and 31 July. You can ask to reduce them if your profit is falling.
Does pay from a job change the tax on my business?
Yes. Your job's pay uses up your Personal Allowance and basic rate band first, so more of your profit can fall into higher rates. It does not affect Class 4 National Insurance, which is worked out on your business profit alone.
What is the trading allowance?
A £1,000 allowance you can claim instead of your actual expenses. If your business income is £1,000 or less in a year you may not need to tell HMRC about it at all. If your real expenses are higher than £1,000, claiming them is usually better.
Does Making Tax Digital change how much tax I pay?
No. Making Tax Digital changes how you keep records and report to HMRC, with quarterly updates through the year and a final declaration at the end, but the rates, allowances and the bill itself are worked out exactly as before.
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