How much tax do the self-employed pay in 2026/27?

Tax is charged on profit, not takings

Your bill starts with your profit. That is your business income for the tax year, minus the allowable expenses you spent running the business. The 2026/27 tax year runs from 6 April 2026 to 5 April 2027. For the wider picture, see our small business tax overview.

Two charges then apply to that profit:

• Income Tax, at the same rates an employee pays
• Class 4 National Insurance, which only the self-employed pay

You report both on your Self Assessment tax return, and HMRC works them out together. If you have other income, such as a salary or rent, it is added to your profit before Income Tax is worked out. That can push part of your profit into a higher band.

Expenses or the £1,000 trading allowance

You can deduct the costs you actually incurred, such as stock, tools, software, travel and phone bills used for the business. Our guide to which expenses you can claim covers the detail.

Instead, you can claim the trading allowance. It is a tax exemption of up to £1,000 a year on trading income. If you claim it, you cannot deduct any other expenses or allowances as well. It tends to suit people with very low costs. If your real costs are higher than £1,000, deducting them usually gives the lower bill.

Cash basis is now the standard

GOV.UK describes cash basis as the standard way for sole traders to record income and expenses. You count income when the money arrives and costs when you pay them, so you do not pay Income Tax on money you have not yet received. Some businesses can choose traditional accounting instead. Our guide to cash basis or traditional accounting compares the two.

Income Tax rates for 2026/27

These are the rates for England, Wales and Northern Ireland, with the standard Personal Allowance of £12,570:

• Personal Allowance, 0%: up to £12,570
• Basic rate, 20%: £12,571 to £50,270
• Higher rate, 40%: £50,271 to £125,140
• Additional rate, 45%: over £125,140

The Personal Allowance shrinks once your adjusted net income goes above £100,000. You lose £1 of allowance for every £2 above that level, so it is zero from £125,140.

If you live in Scotland

Scottish taxpayers pay different Income Tax rates on profits. For 2026/27 the Personal Allowance is still £12,570, then the bands are:

• Starter rate, 19%: £12,571 to £16,537
• Basic rate, 20%: £16,538 to £29,526
• Intermediate rate, 21%: £29,527 to £43,662
• Higher rate, 42%: £43,663 to £75,000
• Advanced rate, 45%: £75,001 to £125,140
• Top rate, 48%: over £125,140

The examples below use the England, Wales and Northern Ireland rates.

National Insurance for the self-employed in 2026/27

National Insurance for sole traders is set by the size of your profit:

• Profits under £7,105. Nothing is due. You can choose to pay voluntary Class 2 contributions of £3.65 a week to protect your National Insurance record.
• Profits of £7,105 or more. Class 2 contributions are treated as paid, so your record is protected without a payment.
• Profits over £12,570. You pay Class 4 at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.

For more on how these payments reach HMRC, see how to pay National Insurance when self-employed.

Worked example: £30,000 profit

Worked example: £60,000 profit

Notice that doubling the profit roughly triples the bill. Profit above £50,270 is taxed at 40%, so it pays to know where you stand before the year ends rather than after.

When the tax is due

For the 2026/27 tax year, the return and the payment fall due in early 2028. For the 2025/26 tax year, which has just closed, the dates are:

• Paper return: HMRC must receive it by 11:59pm on 31 October 2026
• Online return: 11:59pm on 31 January 2027
• Paying the tax you owe: 11:59pm on 31 January 2027

If you also have a job and file online, you may be able to pay through your tax code instead. For 2025/26 the return must be submitted by 11:59pm on 30 December 2026 for this.

Payments on account

Once your bill is established, HMRC usually asks for payments on account. These are advance payments towards the next year's bill, due by midnight on 31 January and 31 July. Each one is usually half of the tax you owed the previous year. Anything still owed after that is a balancing payment, due by midnight on the following 31 January.

You do not need to make them if your last bill was less than £1,000, or if you paid more than 80% of your tax outside Self Assessment, for example through a tax code.

Here is a made-up illustration. If last year's bill was £4,000, you would usually pay £2,000 by 31 January and £2,000 by 31 July. In your first year this can mean paying a full year's bill plus the first advance payment on the same January date. Setting aside money from each sale avoids that shock.

How to keep the bill under control

You cannot change the rates, but good records stop you paying more than you should and make the final figure easy to predict:

• Record every cost. A missed expense means tax on profit you never made.
• Keep business money separate. A dedicated bank account makes it clear what counts.
• Put money aside as you go. Use the worked examples to estimate a share of each payment for tax.
• Keep your records for long enough. GOV.UK says at least 5 years after the 31 January submission deadline of the tax year they relate to. See how long to keep business records.

Digital records will soon be required for many sole traders. Making Tax Digital for Income Tax applies from 6 April 2026 if your qualifying income for 2024/25 was over £50,000. It applies from 6 April 2027 if it was over £30,000 for 2025/26, and from 6 April 2028 if it is over £20,000 for 2026/27. Our guide on what Making Tax Digital means for the self-employed explains the changes.

If your profits are growing, you may also be weighing up a company. Our sole trader vs limited company tax breakdown compares the two. And if you have not yet told HMRC you are trading, start with how to register as self-employed.