Self-Employed Tax Guide UK: What You Owe and How to Pay

By WealthVieu · Updated
This article is based on data from official government and regulatory sources. How we ensure accuracy

Dividend Tax: Learn how UK dividend tax rates and the Dividend Allowance affect your investments: UK Dividend Tax Guide.

Capital Gains Tax: See our complete UK Capital Gains Tax Guide for rates, allowances, and reduction strategies.

For the full PAYE, NI, and take-home planning framework, see the UK Income Tax hub.

Self-employed taxes include Income Tax and National Insurance on your profits. Here’s how to calculate what you owe and reduce your bill.

What Self-Employed Pay

Tax Rate
Income Tax 20-45% (same as employees)
Class 2 NI £3.45/week if profits > £6,725
Class 4 NI 6% (£12,570-£50,270) + 2% above

Tax Calculation Example

Profit: £40,000

Tax Calculation Amount
Income Tax (0-£12,570) 0% £0
Income Tax (£12,571-£40,000) 20% £5,486
Class 2 NI £3.45 × 52 £179
Class 4 NI (£12,570-£40,000) 6% £1,646
Total Tax £7,311
Net Income £32,689

Quick Tax Reference

Profit Total Tax Take-Home
£20,000 £1,966 £18,034
£30,000 £4,411 £25,589
£40,000 £7,311 £32,689
£50,000 £10,566 £39,434
£75,000 £21,166 £53,834
£100,000 £31,966 £68,034

Allowable Expenses

Office & Equipment

Expense Deductible
Computer/laptop ✓
Office furniture ✓
Printer, scanner ✓
Software ✓
Stationery ✓

Travel

Expense Deductible
Business travel ✓
Train/bus fares ✓
Mileage (business use) ✓ (45p/mile first 10K)
Hotels for business ✓
Commuting home to office ✗

Working From Home

Method Amount
Simplified method £6/week (no receipts)
Proportion method Actual costs × business %
If office at home Fraction of mortgage/rent, bills

Professional Costs

Expense Deductible
Professional subscriptions ✓
Accountant fees ✓
Legal fees (business) ✓
Training (updating skills) ✓
Insurance (business) ✓

What You CANNOT Claim

Expense Deductible
Personal clothing ✗
Food (except overnight) ✗
Childcare ✗
Gym membership ✗
Fines and penalties ✗

Self Assessment

Key Dates

Deadline Date
Tax year end 5 April
Register as self-employed 5 October
Paper return deadline 31 October
Online return deadline 31 January
Pay tax owed 31 January
Second payment on account 31 July

Payments on Account

If tax bill > £1,000:

  • Pay 50% by 31 January
  • Pay 50% by 31 July
  • These are advances for next year
  • First year: Pay full bill + first advance

Example First Year

Tax Year Payment Due Amount
2025/26 31 Jan 2027 £6,000 (full)
2025/26 31 Jan 2027 £3,000 (first advance)
2025/26 31 Jul 2027 £3,000 (second advance)
2026/27 31 Jan 2028 Balancing payment

First January payment can be high — budget for it.

Reducing Your Tax Bill

Pension Contributions

Contribution Tax Relief
£5,000 £1,000-£2,250
£10,000 £2,000-£4,500
£20,000 £4,000-£9,000

Pension contributions reduce taxable profit.

Capital Allowances

Item Allowance
Most equipment 100% in year 1
Cars (depends on emissions) Complex rules
Bringing personal items to business At market value

Trading Allowance

Feature Details
Amount £1,000 tax-free
Applies to Casual/small trading
Choose Either allowance OR expenses

Accounting Methods

Cash Basis

Feature Details
Income When received
Expenses When paid
Best for Simple businesses
Limit Up to £150,000 turnover

Traditional (Accrual)

Feature Details
Income When invoiced
Expenses When incurred
Best for Larger/more complex
Required Above £150,000

VAT

VAT Registration

Threshold Amount
Mandatory registration £90,000 turnover
Voluntary registration Any turnover

VAT Considerations

Factor Consideration
B2B customers Often prefer VAT registered
B2C customers May resist price increase
Flat Rate Scheme Simpler accounting
Input VAT Only recover if registered

Record Keeping

What to Keep

Record How Long
Sales invoices 5 years
Purchase receipts 5 years
Bank statements 5 years
Mileage logs 5 years
Business records 5 years after Self Assessment

Making Tax Digital

Requirement When
MTD for VAT Already required
MTD for Income Tax From April 2026 (>£50K)
What it means Digital records, software submissions

Comparing Structures

Self-Employed vs Limited Company

Factor Self-Employed Limited Company
Tax simplicity Simpler More complex
Admin burden Lower Higher
Tax rate (lower profits) Often better Corporation tax + dividends
Tax rate (higher profits) Higher Often better
Liability Personal Limited
IR35 concerns None Can be issue

Crossover point: Often around £50,000-£70,000 profit.

National Insurance Credits

If profits are low:

  • Class 2 gives State Pension credits
  • £3.45/week maintains record
  • Voluntary Class 3 if gaps exist

Tax Planning Tips

Strategy Benefit
Pension contributions Reduces taxable profit
Timing expenses Push into higher profit years
Timing income Spread across tax years
Spouse in business Use their allowances
Claim all expenses Every legitimate cost

Getting Help

Resource Cost
HMRC helpline Free
Gov.uk guidance Free
Accountant £200-£1,000/year typical
Bookkeeper £50-£200/month typical

Bottom Line

Profit Effective Tax Rate
£20,000 9.8%
£30,000 14.7%
£40,000 18.3%
£50,000 21.1%
£75,000 28.2%
£100,000 32.0%

Key tips:

  1. Register with HMRC before 5 October
  2. Track every business expense
  3. Set aside 25-30% of profit for tax
  4. Pay by 31 January (and July for advances)
  5. Consider pension contributions for tax relief
  6. Keep records for 5+ years

Sources

WealthVieu
Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy