Self Employed Tax Calculator UK 2026/27 – Free & Accurate

❓ How much can I earn self-employed before paying tax?

You can earn up to £12,570 in net profit (after expenses) before paying Income Tax in 2026/27.

This is your personal allowance, which is the same whether you're employed or self-employed. However, you may still need to pay Class 2 National Insurance (£182/year) if your profits exceed £6,725, and Class 4 NI kicks in on profits above £12,570.

Example: If your turnover is £20,000 and expenses are £8,000, your net profit is £12,000 – below the personal allowance, so no Income Tax. You'd pay £182 Class 2 NI only.

Important: You must still register for Self Assessment and file a tax return even if you owe no tax, as long as your self-employment income exceeds £1,000 per year (the trading allowance).

❓ What expenses can I claim as self-employed?

You can claim any expenses that are "wholly and exclusively" for business purposes.

Common allowable expenses:

• Office costs: Stationery, postage, phone bills (business portion), internet
• Travel: Business mileage (45p/mile first 10,000, then 25p/mile), train/bus fares, parking
• Equipment: Computers, tools, machinery, furniture
• Premises: Rent, business rates, utilities (if dedicated business premises)
• Home working: £6/week (simplified) or calculate actual portion of rent, utilities, council tax
• Professional services: Accountant, solicitor, bank charges
• Marketing: Website, advertising, business cards
• Insurance: Professional indemnity, public liability
• Training: Courses directly related to your business skills

NOT allowable: Personal expenses, client entertainment (meals/drinks), gym membership (unless fitness instructor), non-business clothing, fines/penalties.

If you have both personal and business use (e.g., mobile phone, car), you can only claim the business proportion.

❓ Do I need to register for Self Assessment immediately?

Yes, you must register by 5 October following the tax year you started self-employment.

Timeline example:

• Started self-employment: 1 June 2026
• Tax year: 2026/27 (6 April 2026 to 5 April 2027)
• Register by: 5 October 2027
• Tax return due: 31 January 2028 (online)
• Payment due: 31 January 2028

Late registration penalty: £100 automatic penalty if you miss the 5 October deadline, even if you have no tax to pay.

How to register: Use GOV.UK's online registration service. You'll need your National Insurance number and details about your business.

Exception: If your only income from self-employment is under £1,000 per year, you don't need to register (this is covered by the Trading Allowance).

❓ Can I reduce my tax bill with pension contributions?

Yes! Personal pension contributions are one of the most tax-efficient ways to reduce your self-employed tax bill.

How it works:

• Pension contributions reduce your adjusted net income (before calculating your tax)
• You get tax relief at your highest marginal rate
• Basic rate (20%): £1,000 contribution = £200 tax saving
• Higher rate (40%): £1,000 contribution = £400 tax saving
• Additional rate (45%): £1,000 contribution = £450 tax saving

Annual allowance: You can contribute up to £60,000 per year (or 100% of your earnings, whichever is lower) and receive tax relief.

Example: You earn £60,000 profit. Contributing £10,000 to your pension reduces your taxable profit to £50,000, saving you £4,000 in Income Tax (40% rate) plus Class 4 NI.

Bonus benefit: If you earn over £100,000, pension contributions can restore your personal allowance (which reduces by £1 for every £2 over £100,000).

Use our Pension Contribution Calculator to see your exact savings.

❓ What happens if I don't pay my Self Assessment tax on time?

HMRC charges penalties and interest for late payment or late filing of your tax return.

Late filing penalties:

• 1 day late: £100 automatic penalty
• 3 months late: £10 per day (up to £900)
• 6 months late: £300 or 5% of tax owed (whichever is higher)
• 12 months late: Another £300 or 5% of tax owed, plus potential investigation

Late payment penalties:

• 30 days late: 5% of unpaid tax
• 6 months late: Another 5% of unpaid tax
• 12 months late: Another 5% of unpaid tax

Interest charges: HMRC also charges interest on any unpaid tax from the payment deadline (31 January). The rate changes but is typically 7-8% per year.

Payment plan option: If you can't pay your full tax bill, contact HMRC immediately to set up a Time to Pay arrangement (payment plan). This stops penalties accumulating if agreed in advance.

Tip: Use our calculator to estimate your tax bill early and save monthly into a separate business savings account to avoid cash flow issues at the deadline.

❓ Should I set up a limited company instead of being self-employed?

It depends on your profit level, business growth plans, and personal circumstances. There's no one-size-fits-all answer.

Stay self-employed (sole trader) if:

• Your annual profit is below £50,000
• You value simplicity (easier accounting, no Companies House filing)
• Your business is low-risk (minimal liability concerns)
• You want to keep all profits without restrictions

Consider a limited company if:

• Your profit exceeds £50,000 (Corporation Tax at 25% can be lower than Income Tax at 40%)
• You want limited liability protection (personal assets protected)
• You plan to retain profits in the business for growth
• You need to attract investors or apply for larger contracts
• Tax efficiency: you can pay yourself via dividends (taxed at lower rates than salary)

Tax comparison example (£60,000 profit):

• Sole trader tax: £14,178 (Income Tax + NI)
• Limited company: Corporation Tax (25%) + dividend tax ≈ £11,500 (potential £2,600+ saving)

However: Limited companies have higher admin costs (accountant fees, Companies House filings, payroll) and stricter rules on accessing profits.

Action: Speak to an accountant for personalized advice. Our Take-Home Pay Calculator can help compare employed vs self-employed income.

❓ Do I still pay National Insurance if I have a full-time job?

Yes, you pay Class 4 National Insurance on your self-employed profits regardless of whether you also pay employee NI in a job.

How it works:

• Employed job: You pay Class 1 NI on your salary (8% on £12,570–£50,270, then 2% above)
• Self-employment: You pay Class 4 NI on your self-employed profits (6% on £12,570–£50,270, then 2% above)
• Both are calculated and paid separately

Example: You earn £30,000 in your job and make £15,000 self-employed profit.

• Job: Class 1 NI deducted automatically via PAYE
• Self-employment: Class 4 NI calculated on Self Assessment: (£15,000 - £12,570) × 6% = £145.80
• You pay both – no offset between them

Income Tax: Your employed and self-employed income is combined to determine your total tax liability (so you may pay higher rate tax even if each income source alone is basic rate).

Important: If your combined income pushes you into the higher rate band, your self-employed profit above £50,270 is taxed at 40% Income Tax + 2% Class 4 NI = 42% total.

Check our Hourly Wage Tax Calculator if you balance employed and self-employed work.

❓ What's the difference between turnover and profit?

Turnover is your total income before expenses; profit is what's left after deducting allowable business expenses. You pay tax on profit, not turnover.

Simple breakdown:

• Turnover (Gross Income): All money you receive from customers/clients
• Minus: Allowable Expenses: Business costs you can deduct
• Equals: Net Profit: What you actually earned (this is taxable)

Example:

• You're a freelance photographer
• Turnover: £40,000 (client payments)
• Expenses: £12,000 (camera equipment, software, travel, insurance)
• Net profit: £28,000 (you pay tax on this amount only)

Why this matters: Many new self-employed people mistakenly think they'll pay tax on their full turnover. In reality, legitimate business expenses significantly reduce your tax bill.

VAT consideration: If your turnover exceeds £90,000 (2026/27 threshold), you must register for VAT. At this point, you charge VAT to customers and pay it to HMRC quarterly – but this doesn't affect your Income Tax or NI calculations.

Record keeping: Keep all receipts and invoices for at least 5 years. HMRC can request evidence of your expenses during an investigation.