How much tax will I pay when self-employed?

A self-employed person in England, Wales or Northern Ireland pays no tax on the first £12,570 of profit, then 20% Income Tax plus 6% Class 4 National Insurance on profit up to £50,270, giving a combined marginal rate of 26% across most of the basic-rate band ^[1]. On a typical sole-trader profit of £30,000, that works out at roughly £4,532 in total tax and National Insurance, an effective rate of about 15% ^[2].

The exact figure depends entirely on profit, because self-employed tax is charged on what the business earns after allowable expenses, not on turnover ^[3]. Two taxes apply to that profit: Income Tax and Class 4 National Insurance, both worked out and paid through the Self Assessment system ^[4]. There is no employer deducting anything at source, so the whole liability lands on the individual.

This guide sets out exactly how much a self-employed person pays at a range of profit levels, with worked examples of the Income Tax and National Insurance at each, the effective rates they produce, how the £100,000 allowance trap works, and how a sole trader's bill compares with an employee earning the same amount.

Key takeaways

• Self-employed profit is taxed at 20%, 40% and 45% Income Tax above the £12,570 Personal Allowance, the same bands as employment income ^[1].
• Class 4 National Insurance adds 6% on profit between £12,570 and £50,270, and 2% above that, for the 2026-27 tax year ^[2].
• A sole trader with £30,000 profit pays around £4,532 in total, an effective rate of about 15% ^[2].
• Between £100,000 and £125,140 of profit, the withdrawal of the Personal Allowance creates a 60% marginal Income Tax rate ^[5].
• A self-employed person pays less National Insurance than an employee on the same income, because Class 4 is charged at 6% against the employee's 8% ^[2].

The two taxes on self-employed profit

Every pound of self-employed profit above the tax-free thresholds is charged to two separate taxes. The first is Income Tax, which uses the same bands and Personal Allowance as employment income. The second is Class 4 National Insurance, a contribution unique to the self-employed ^[2]. Both are calculated on the same profit figure and paid together through the annual return ^[4].

The rates that apply for the 2026-27 tax year are set out below.

The combined marginal rate is the figure that matters when a trader is deciding whether extra work is worth taking on. In the basic-rate band, 26p of every additional pound of profit goes in tax and National Insurance, leaving 74p ^[1]. Once profit passes £50,270, the marginal rate jumps to 42%, because Income Tax rises to 40% while Class 4 National Insurance drops to 2% on the profit above that point ^[2].

Class 2 National Insurance

There is a third, smaller contribution to be aware of. Class 2 National Insurance is treated as paid automatically once profit reaches the Small Profits Threshold of £7,105, with no charge falling due, which preserves the trader's entitlement to the State Pension ^[2]. A person whose profit falls below that threshold pays nothing automatically but can choose to pay Class 2 voluntarily at £3.65 a week to keep their contributions record intact ^[2]. Because Class 2 is either treated as paid or paid at a flat weekly rate, it does not change the marginal rates in the table above ^[2].

How much tax at each profit level

The clearest way to see the burden is to run the numbers across a range of profits. The table below shows the Income Tax, Class 4 National Insurance, total liability and effective rate for a sole trader in England, Wales or Northern Ireland in the 2026-27 tax year. The effective rate is the total divided by the whole profit, which is always lower than the marginal rate because the first £12,570 is tax-free ^[1]. The tax-free threshold itself is explained in the Moonworkers guide to how much a person can earn before paying tax.

Two patterns stand out. First, the effective rate climbs steadily but stays well below the headline marginal rate, because the tax-free Personal Allowance and the lower National Insurance rate above £50,270 both drag the average down ^[1]. Second, the jump between £50,000 and £60,000 of profit is the steepest in proportional terms, as the higher-rate Income Tax band starts to bite ^[2]. Sole traders who want to model their own figure precisely can use HMRC's Self Assessment estimate tool, which applies the current rates to any profit ^[6].

Worked example at £30,000 profit

Taking the most common case in detail shows how the two taxes combine. A trader with £30,000 of profit first sets the £12,570 Personal Allowance against it, leaving £17,430 of taxable profit ^[1]. Income Tax at 20% on that £17,430 is £3,486, and Class 4 National Insurance at 6% on the same £17,430 is £1,046 ^[2]. The total is £4,532, which against £30,000 of profit is an effective rate of just over 15% ^[2]. The single worked figure is a useful anchor, because it shows that a middling sole-trader profit leaves roughly 85p in the pound after tax and National Insurance ^[1].

Worked example at £60,000 profit

A higher-rate example shows the two-tier structure clearly. On £60,000 of profit, the taxable amount after the Personal Allowance is £47,430 ^[1]. Income Tax is 20% on the £37,700 that falls in the basic-rate band, which is £7,540, plus 40% on the £9,730 above £50,270, which is £3,892, giving £11,432 ^[1]. Class 4 National Insurance is 6% on the £37,700 basic-rate slice, which is £2,262, plus 2% on the £9,730 above the upper limit, which is £195, giving £2,457 ^[2]. The total of £13,889 is an effective rate of about 23% ^[2].

The £100,000 allowance trap

One band deserves special attention because it hides the highest marginal rate in the system. Once profit passes £100,000, the Personal Allowance is withdrawn at a rate of £1 for every £2 of income above that figure, disappearing entirely at £125,140 ^[5]. The withdrawal is measured against adjusted net income, which is total taxable income after certain reliefs such as pension contributions and Gift Aid ^[7].

The effect is a marginal Income Tax rate of 60% between £100,000 and £125,140. Every extra £2 of profit is taxed at the 40% higher rate, and at the same time £1 of Personal Allowance is lost, which is itself then taxed at 40%, adding a further 20 percentage points ^[5]. Adding Class 4 National Insurance at 2% on that band pushes the true marginal rate on profit in this range to 62% ^[2]. A trader whose profit is edging into this band often finds that a pension contribution, which reduces adjusted net income, is one of the few ways to restore some of the lost allowance ^[7].

Self-employed versus employed on the same income

A common question is whether the self-employed pay more or less than employees. On the Income Tax side they pay exactly the same, because the bands and Personal Allowance are identical ^[1]. The difference is in National Insurance. An employee pays Class 1 National Insurance at 8% on earnings between £12,570 and £50,270, whereas a self-employed person pays Class 4 at 6% on the same band, a two-percentage-point saving ^[2].

The comparison at £50,000 makes the gap concrete. A sole trader with £50,000 of profit pays £9,732 in Income Tax and Class 4 National Insurance combined ^[2]. An employee on a £50,000 salary pays the same £7,486 of Income Tax but £2,994 of Class 1 National Insurance, a total of £10,480 ^[1]. The self-employed person is around £748 better off on the same headline figure, before considering that the employer also pays National Insurance on top of an employee's wage, a cost the self-employed never carry ^[2].

Estimate the employment comparison

For anyone weighing self-employment against a salaried role, seeing the employee figure side by side helps. The Moonworkers UK salary calculator applies the 2026-27 PAYE and National Insurance rules to any gross salary, which gives the employed half of the comparison against the self-employed figures set out above.

Reducing the bill legitimately

The size of the tax bill follows directly from the profit figure, so the most reliable way to reduce it is to make sure every allowable expense has been claimed. Costs incurred wholly and exclusively for the business, such as tools, stock, business mileage, a proportion of home running costs and professional fees, all reduce the profit that tax is charged on ^[3]. A trader with £40,000 of turnover and £8,000 of genuine expenses is taxed on £32,000, not £40,000, which at the basic-rate marginal rate of 26% is a difference of over £2,000 in tax and National Insurance ^[3].

Beyond expenses, pension contributions reduce taxable income and, for higher earners, can claw back part of a withdrawn Personal Allowance ^[7]. The trading allowance of £1,000 offers a simpler route for very small operations, letting a trader deduct a flat £1,000 instead of itemised expenses where that produces a lower profit ^[8]. None of these are avoidance schemes; they are the reliefs the system is built around, and claiming them accurately is simply part of filing a correct return ^[9].

Budgeting for the bill matters as much as calculating it. Because the tax is paid in arrears through Self Assessment, and often with payments on account towards the next year, a first-time trader can face a January bill of one and a half times the tax due for the year ^[6]. Setting aside a percentage of each payment received keeps that bill manageable. Sole traders who also employ staff can keep the wage costs that feed their expenses figure accurate by running payroll software built for sole traders, and the full mechanics of paying the bill are covered in the Moonworkers guide to paying tax when self-employed.

Conclusion

For most self-employed people, the tax bill is more predictable than it first appears. Income Tax and Class 4 National Insurance combine to a marginal rate of 26% across the basic-rate band, which produces effective rates in the region of 10% to 20% for the great majority of sole traders whose profit sits below £50,270. The numbers only accelerate at the higher-rate threshold and, sharply, in the narrow £100,000 to £125,140 band where the Personal Allowance melts away.

The practical takeaways are simple. Tax is charged on profit, so accurate expenses matter; the self-employed pay slightly less National Insurance than employees on the same income; and the bill should be set aside through the year rather than found in January. A trader who knows their effective rate can price work, plan pension contributions and budget for Self Assessment with confidence, whatever the profit turns out to be. The full picture of how that profit is reported sits in the companion guide to the self-employed tax return.

FAQs

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

A self-employed person pays no Income Tax on the first £12,570 of profit, which is the Personal Allowance, and no Class 4 National Insurance below the same £12,570 threshold for the 2026-27 tax year ^[1]. On top of that, gross self-employment income of £1,000 or less is covered by the trading allowance and does not even need to be reported ^[8]. Profit above £12,570 is taxed at 20% plus 6% Class 4 National Insurance until it reaches £50,270 ^[2].

How much tax will I pay on £30,000 self-employed?

On £30,000 of profit in the 2026-27 tax year, a sole trader pays £3,486 in Income Tax and £1,046 in Class 4 National Insurance, a total of £4,532 ^[2]. That is an effective rate of just over 15%, leaving around £25,468 after tax and National Insurance ^[1]. The figure assumes the trader is in England, Wales or Northern Ireland and has no other income, and it is calculated on profit after allowable expenses, not on turnover ^[3].

Do the self-employed pay more tax than employees?

On Income Tax, the self-employed pay exactly the same as employees, because the bands and Personal Allowance are identical ^[1]. On National Insurance they pay less, because Class 4 is charged at 6% on the main band against the employee's 8% Class 1 rate ^[2]. On a £50,000 income, the self-employed person pays around £748 less than an employee, and the employer's separate National Insurance on a salary is a cost the self-employed never bear ^[2].

Why is the marginal tax rate 60% above £100,000?

Once profit passes £100,000, the £12,570 Personal Allowance is reduced by £1 for every £2 of income above that level, and it disappears entirely at £125,140 ^[5]. Each extra £2 earned is taxed at the 40% higher rate, and the £1 of allowance lost is also taxed at 40%, producing a combined marginal Income Tax rate of 60% across this band ^[5]. A pension contribution reduces adjusted net income and can restore part of the lost allowance, which is why higher earners often use one to manage this band ^[7].

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