Self-employed tax calculator (2026/27)

Working out what you owe HMRC as a sole trader is not complicated once you know the rates, but the first big tax bill still catches people out. This guide explains how your Income Tax and National Insurance are worked out for the 2026/27 tax year, with a worked example, so you can see roughly what to set aside from every payment.

Prefer to skip the maths? Try our free interactive tax calculator — enter your income and see your Income Tax, National Insurance and take-home in seconds.

How your tax is worked out

You pay tax on your profit, which is your income after allowable business costs, not on everything you invoice. Everyone gets a tax free Personal Allowance, currently £12,570, before Income Tax starts. Above that you pay 20% up to £50,270, then 40% up to £125,140, then 45%. On top of Income Tax you pay Class 4 National Insurance at 6% on profit between £12,570 and £50,270, then 2% above that. Class 2 National Insurance is no longer compulsory for profits above £7,105, so most sole traders no longer pay it.

A worked example

Say you invoice £45,000 in a year and have £9,000 of allowable costs, so your taxable profit is £36,000. Your Income Tax is 20% of the profit above the Personal Allowance, which comes to £4,686. Your Class 4 National Insurance is 6% of the same band, about £1,406. That is roughly £6,092 to set aside for the year, around 17% of your profit, or about £508 a month. The higher your profit, the higher that percentage climbs, because more of it falls into the 40% band.

Set the money aside as you go

The tradespeople who handle tax calmly are the ones who move a share of every payment into a separate pot as it comes in, rather than facing the whole bill in January. Work out your rough percentage, put it aside from each invoice, and the Self Assessment deadline becomes a formality. If your profit is likely to push you into the 40% band, lean towards setting aside 30% or more on the income above the threshold.

Related guides

• How much should you set aside for tax as a sole trader?

• What expenses can self-employed tradespeople claim?

• Making Tax Digital: what sole-trader tradespeople need to know

Working this out from your real income and expenses as you go, so there are no January surprises, is exactly what TradePilot is being built to do for UK trades. Join the waiting list and we will let you know the moment it launches.