How self-employed tax works in 2026/27
A sole trader normally pays Income Tax and Class 4 National Insurance on taxable profit, not turnover. For the 2026/27 tax year, profit is worked out from income and allowable expenses for the period, then combined with other taxable income. The figures below cover England, Wales and Northern Ireland. Scotland has different Income Tax bands.
From turnover to taxable profit
Start with business income, then deduct allowable business expenses. The amount left is trading profit before any other tax adjustments or reliefs.
For example, £60,000 of business income and £20,000 of allowable costs gives £40,000 of profit. VAT is accounted for separately if the business is registered.
HMRC explains the common categories in expenses if you are self-employed.
Income Tax in 2026/27
The standard Personal Allowance is £12,570. It is reduced when adjusted net income goes over £100,000 and can fall to zero.
For England, Wales and Northern Ireland in 2026/27, a person with the standard Personal Allowance pays 20% on income from £12,571 to £50,270. The higher rate is 40% from £50,271 to £125,140, and the additional rate is 45% above £125,140. Other income can use some or all of those bands before trading profit is considered.
Check the current figures in HMRC's Income Tax rates and allowances.
Class 4 National Insurance in 2026/27
For 2026/27, Class 4 National Insurance is charged at 6% on self-employed profits over £12,570 up to £50,270, then 2% above £50,270.
If profits are £7,105 or more, Class 2 contributions are treated as paid to protect the National Insurance record. If profits are below £7,105, voluntary Class 2 contributions may be available at £3.65 a week.
See HMRC's self-employed National Insurance rates.
Worked example: £40,000 profit
This fictional example assumes the person lives in England, Wales or Northern Ireland, has no other income, receives the full Personal Allowance and has no student loan, pension adjustment, taxable benefits, Capital Gains Tax, High Income Child Benefit Charge or other reliefs or charges.
Trading profit: £40,000.00
Less Personal Allowance: £12,570.00
Income Tax: £5,486.00
Class 4 National Insurance: £1,645.80
Total in this example: £7,131.80
That total is 17.8% of the £40,000 profit. It is not a general tax-saving percentage. Different profit, other income or repayments can change it substantially.
Use the self-employed tax calculator for a rough estimate based on your own income and costs.
Payments on account can change the cash due
Payments on account are advance payments towards the next year's Income Tax and Class 4 National Insurance. They are normally due on 31 January and 31 July, with each payment equal to half of the previous year's relevant bill.
HMRC says they are not normally required if the previous bill was less than £1,000 or more than 80% of the tax was collected outside Self Assessment.
If the £7,131.80 example were a first Self Assessment bill and no exception applied, the 31 January payment could include the £7,131.80 balancing amount plus a first payment on account of £3,565.90. A second £3,565.90 would normally be due on 31 July. Payments on account are credited against the following year's actual bill.
Read HMRC's payments on account guidance and the separate guide to building a sole-trader tax pot.
File and pay on time
For the tax year ending 5 April 2027, the usual online filing and payment deadline is 31 January 2028. A paper return normally has an earlier deadline. HMRC may give a different filing deadline in some circumstances.
Check the live Self Assessment deadlines rather than relying on a date saved from an older article.
In brief
Keep business income and allowable costs up to date, calculate tax from profit and plan separately for payments on account. Recheck the figures if other income, student loans or personal circumstances change.
Sources
Written by Chris, founder of TradePilot. This is general information, not personal tax or financial advice. The worked example has deliberately limited assumptions and does not represent every Self Assessment liability. Last reviewed against HMRC's 2026/27 rates on 10 September 2026.
Tonight’s paperwork, done by teatime
TradePilot is launching soon. Join the waiting list and be first in when it does.
Join the waiting list