How much tax do I pay as self-employed?

You pay Income Tax (20-45%) plus Class 2 (£3.45/week) and Class 4 National Insurance (6-2%) on your profits. Total effective rate is roughly 26-47% depending on income level.

What expenses can I claim as self-employed?

You can deduct business expenses like equipment, travel for work, professional subscriptions, working from home costs, phone/internet, and business insurance. Keep receipts for everything.

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

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:

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

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