What Is Self-Employed Tax in the UK?
When you work for yourself in the UK — as a sole trader, freelancer, contractor or partner — you are responsible for calculating and paying your own tax directly to HMRC. Unlike employment where tax is deducted automatically through PAYE, self-employed income tax is paid via Self Assessment.
Self-employed tax covers two main charges: Income Tax on your profits, and National Insurance Contributions. Both are based on your net profit — the money left after deducting allowable business expenses from your gross revenue.
Self-Employed Income Tax Brackets 2025/26
UK income tax uses a banded system. Every self-employed person gets the standard personal allowance of £12,570 before paying any income tax. Above that, rates step up:
| Band | Income Range | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Source: HMRC / gov.uk · Rates correct for 2025/26 tax year.
If your income exceeds £100,000, your personal allowance reduces by £1 for every £2 above that limit — eliminating it entirely above £125,140. This creates an effective 60% marginal tax rate between £100,000 and £125,140. See personal allowance over £100k for more detail.
Self-Employed Tax Brackets: National Insurance
Self-employed workers pay a different class of National Insurance than employees. For 2025/26:
| Class | Applies to | Rate |
|---|---|---|
| Class 2 NI | Profits above £12,570 | £3.45/week flat |
| Class 4 NI | Profits £12,570–£50,270 | 9% |
| Class 4 NI (upper) | Profits above £50,270 | 2% |
Class 2 contributions protect your entitlement to the State Pension and other benefits. Class 4 is a percentage of profits and contributes to general tax revenue. Use the NI calculator to estimate your contributions.
Allowable Expenses That Reduce Your Tax Bill
Your tax is calculated on profit, not turnover. Claiming all legitimate business expenses directly reduces what you owe. Common deductible expenses include:
- ✓Office costs — rent, utilities, stationery, broadband (proportionate to business use)
- ✓Travel — fuel, train tickets, parking, business mileage at HMRC's approved rate
- ✓Equipment — computers, tools, machinery and professional software
- ✓Professional fees — accountants, solicitors, professional memberships
- ✓Marketing — website costs, advertising, business cards
- ✓Pension contributions — fully deductible through pension tax relief
Keep receipts for all business expenditure. HMRC can ask for evidence during an enquiry. For working from home, you can claim simplified flat-rate expenses or the actual proportion of household costs attributable to work. The trading allowance is an alternative for very simple income streams.
Tax Year Dates and Payment Deadlines
The UK tax year runs from 6 April to 5 April the following year. For 2025/26 that means 6 April 2025 to 5 April 2026. Key deadlines are:
| Date | Action Required |
|---|---|
| 5 October | Register for Self Assessment if newly self-employed |
| 31 October | Submit paper Self Assessment tax return |
| 31 January | Submit online return and pay all tax owed |
| 31 July | Second payment on account (if applicable) |
HMRC charges automatic penalties for late returns and interest on late payments. If you are newly self-employed, you must register as self-employed with HMRC promptly.
Payments on Account Explained
If your tax bill exceeds £1,000, HMRC usually requires payments on account — advance payments towards next year's liability, based on this year's bill. You pay 50% by 31 January and 50% by 31 July. This can create a cash-flow shock in year two, where you effectively pay 150% of your first year's bill: the actual amount plus the first payment on account. Planning ahead with your tax calculator helps you set aside the right amount throughout the year.