UK Self-Employed Tax Calculator

Being self-employed means working out your own tax bill instead of having it deducted automatically through PAYE, and it involves more moving parts than a standard employee's payslip: Income Tax, Class 4 National Insurance, and until recently, Class 2 as well.

This calculator brings all of that together, so you can see your full tax bill as a sole trader in one place, based on your profit after expenses.

How to use the self-employed tax calculator

Enter your annual profit before expenses, then your allowable business expenses. The calculator works out your net profit, then applies Income Tax and Class 4 National Insurance to give you a total tax bill, an effective tax rate, and what you are left with after everything is paid.

How the tax is worked out

Your allowable expenses are subtracted from your gross profit first, giving your taxable net profit. Income Tax is then charged using the same bands as employees: nothing on the first £12,570, 20% up to £50,270, and higher rates above that. Class 4 National Insurance is calculated separately, at 6% on profits between £12,570 and £50,270, and 2% above that.

Class 2 National Insurance no longer applies to most self-employed people with profits above the small profits threshold, currently £6,845, since a change that took effect in April 2024. Below that threshold, you can choose to pay it voluntarily to protect your State Pension record, but it is not compulsory.

Sole trader versus limited company

This calculator assumes you are trading as a sole trader, the simplest and most common structure for self-employment, where your business profit is simply your own income. Some self-employed people instead set up a limited company, taking a small salary plus dividends, which is taxed differently again and covered by our separate dividend tax calculator. Which structure suits you depends on your profit level, admin appetite, and future plans for the business, and is often worth discussing with an accountant once your profits reach a meaningful level.

Worked example

Take a sole trader with £40,000 in profit before expenses, and £5,000 of allowable business expenses, leaving a net profit of £35,000.

Income Tax on £35,000, after the £12,570 Personal Allowance, comes to around £4,486. Class 4 National Insurance on the same profit adds around £1,346. That gives a total tax bill of roughly £5,832, an effective tax rate of about 14.6% of the original £40,000 profit, leaving around £34,168 to take home.

Try increasing the expenses figure in the calculator above. Every pound of genuine allowable expense reduces your taxable profit directly, which lowers both your Income Tax and your Class 4 National Insurance at the same time, since both are calculated on the same net profit figure.

This is worth bearing in mind when deciding whether an expense is worth claiming. A genuine £1,000 business expense does not just cost you £1,000. It reduces your taxable profit by £1,000, saving you tax and Class 4 National Insurance on that amount too, so the real cost to you after tax relief is lower than the amount you actually spent.

Common mistakes to avoid

A common mistake is underestimating expenses, either by not keeping proper records throughout the year or by being unsure what genuinely qualifies. Good records, kept as you go rather than reconstructed at the last minute, make a real difference to an accurate tax bill. Another mistake is forgetting about payments on account, advance payments HMRC often requires twice a year towards your next tax bill, based on your current year's liability. These catch many newly self-employed people out in their second year, when two payments can land close together.

It is also worth setting money aside as you earn, rather than waiting until your bill is due. A simple habit of moving a percentage of every payment you receive into a separate account can prevent a nasty surprise at self-assessment time. Many self-employed people aim to set aside somewhere between a quarter and a third of their profit, though the exact figure depends on your total income and how much of it falls into higher tax bands.

Finally, do not overlook pension contributions. Unlike employees, the self-employed do not have an employer automatically enrolling them into a workplace pension, so it is entirely down to you to set one up if you want to build retirement savings. Pension contributions also reduce your taxable profit, which can lower your Income Tax bill in the same way a genuine business expense does.

Related calculators

Compare your position with an equivalent employee salary using our Income Tax calculator and take-home pay calculator. If you also take dividends from a limited company rather than trading as a sole trader, our dividend tax calculator covers that structure instead. Our National Insurance calculator and income tax guide have more detail on how each part of the system works.