Self-employed tax calculator
Work out what you owe HMRC on your self-employment profit: income tax at Scottish or rest-of-UK rates, Class 4 National Insurance, and where you stand on Class 2. It also splits the bill into the two dates you actually have to pay it, 31 January and 31 July, because payments on account make a first-year bill half again as large as the tax itself.
What you pay, and when
HMRC collects this on two dates, not one. The January figure includes the first instalment towards next year.
£0
£0
Your profit
Your bill
Class 4 is charged on trading profit only. A salary carries Class 1 instead, so other income never adds to this line.
Class 2 National Insurance
Your next £1 of profit is taxed at 0%
Your profit sits between £43,663 and £50,270, where Scotland's 42% higher rate has already started but Class 4 National Insurance is still charging 6%. Income tax is devolved and National Insurance is not, so the two ladders do not line up: the Class 4 upper limit is pinned to the UK higher-rate threshold of £50,270 while Scotland's higher rate begins £6,608 earlier. The same profit in England, Wales or Northern Ireland carries a 26% marginal rate.
This looks wrong and is correct. Above £50,270 Class 4 drops from 6% to 2% while Scottish income tax stays at 42%, so the rate on your next pound goes from 48% down to 44%. Earning more does not reduce your bill, only the rate on the next slice of it.
Which bands your profit lands in
Trading profit stacks on top of your other income, so it is taxed from the top of your existing income upwards.
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This covers a sole trader's trading profit: income tax, Class 4 and your Class 2 position. It does not cover VAT, capital allowances, trading losses, student loan repayments, basis-period adjustments, or running the business through a limited company.
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OpenHow this is calculated
- We work out your taxable profit. That is your self-employment income minus either your actual expenses or the £1,000 trading allowance, whichever leaves you better off. You claim one or the other, never both.
- We stack your profit on top of any other income you have, because your tax band depends on everything you earn rather than just the business.
- We work out your Personal Allowance, the amount you earn before paying tax, and reduce it by £1 for every £2 your total income goes over £100,000.
- We apply your income tax bands. Scotland has six, the rest of the UK has three. Trading profit is taxed at the rates for where you live, not where your customers are.
- We take the tax you would pay without the business away from the tax you would pay with it. The difference is what the self-employment actually costs you, and it is the only way to get the Personal Allowance taper right.
- We add Class 4 National Insurance: 6% of profit between £12,570 and £50,270, then 2% above that. National Insurance is set UK-wide, so this part is identical in Scotland.
- We check your Class 2 position against the Small Profits Threshold of £7,105. Class 2 stopped being compulsory in April 2024, so for most people there is nothing to pay.
- Finally we split the result into what you owe on 31 January and 31 July, including the payments on account HMRC asks for towards next year.
Frequently asked questions
How much tax do I pay as a sole trader?
Income tax on your profit at the normal rates, plus Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above that. There is no separate, lower rate for self-employment. Class 2 National Insurance is no longer compulsory, so for most sole traders there is nothing to pay on top.
Do I pay more tax if I am self-employed in Scotland?
On the income tax, yes, once your income passes £29,526. Trading profit is taxed at Scottish rates because income tax is devolved. National Insurance is reserved to Westminster, so Class 4 is identical UK-wide. The gap is sharpest between £43,663 and £50,270, where a Scottish sole trader faces a 48% marginal rate against 26% in England, Wales and Northern Ireland.
What is the £1,000 trading allowance?
A flat £1,000 you can deduct from your self-employment income instead of claiming actual expenses. You cannot do both. If your real costs are under £1,000 the allowance leaves you better off, and if your income for the year is under £1,000 you usually have nothing to report at all. This calculator checks both routes and uses the better one.
Why is my first Self Assessment bill so much bigger than my tax?
Payments on account. If your bill is £1,000 or more, HMRC asks for half of it again on 31 January towards next year, and another half on 31 July. In your first year of trading no instalments have been made yet, so 31 January carries the full year's tax plus half of it again in one payment. That is 150% of the tax you actually owed for the year.
Do I still have to pay Class 2 National Insurance?
Not since April 2024. If your profit is at or above the Small Profits Threshold of £7,105, Class 2 is treated as paid and you get your qualifying year towards the State Pension without paying anything. Below that threshold you can pay voluntarily at £3.65 a week, which is the cheapest way to protect a year on your record.
Is Class 4 National Insurance charged on my salary as well?
No. Class 4 applies to trading profit only. A salary carries Class 1 National Insurance instead, deducted by your employer, and the two are worked out separately. Income from a job never increases your Class 4 bill, although it does affect which income tax band your profit falls into.
Self-employed income arrives unevenly and the tax lands in one lump each January. This is a level-headed read on handling money you cannot predict month to month.
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This calculator is for general guidance only. It does not replace advice from an accountant who handles sole traders on your personal circumstances.
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