Self-Employed Tax Calculator

Registering as self-employed

You must register with HMRC as self-employed by 5 October in your second tax year of trading, so if you started self-employment in the 2025/26 tax year, you must register by 5 October 2026. Registering late can result in a penalty, though HMRC is often lenient for genuine first-timers. You register online at gov.uk, after which you'll receive a Unique Taxpayer Reference (UTR) by post within ten working days.

If your turnover is below £1,000 in a tax year, you benefit from the trading allowance and do not need to register or file a return for that income.

The £1,000 trading allowance

If your self-employment income is £1,000 or less in a tax year, it is completely tax-free , you do not need to register or file a Self Assessment return for it. If your income exceeds £1,000, you have a choice: deduct actual business expenses, or use the £1,000 trading allowance as a flat deduction instead of recording individual expenses. The allowance is simpler but only worth choosing if your actual expenses are below £1,000.

Income tax on self-employment profits

You pay income tax on your taxable profit, total income from self-employment minus allowable business expenses. The rates are the same as for employees: the first £12,570 is tax-free (your personal allowance), then 20% on profits up to £50,270, 40% up to £125,140, and 45% above that. If you have other income (employment, rental, savings interest), it all counts together when determining which band your self-employment profit falls into.

National Insurance for the self-employed

Self-employed people pay Class 4 NI on profits above £12,570 at 6% up to £50,270, and 2% on profits above that. Class 2 NI (a flat weekly charge) was effectively abolished from April 2024, it is now treated as paid automatically when you file Self Assessment if your profits exceed the Small Profits Threshold (£6,845), maintaining your entitlement to the State Pension and certain benefits without requiring a separate payment.

Allowable business expenses

You can deduct expenses that are "wholly and exclusively" for business purposes. This reduces your taxable profit and therefore your tax bill. Common allowable deductions include:

• Office costs, stationery, postage, software subscriptions
• Travel costs for business journeys (not commuting from home to a fixed place of work)
• Stock, raw materials, and goods for resale
• Marketing, advertising, and website costs
• Professional subscriptions and trade body membership
• A proportion of home costs (heating, broadband) if you work from home
• Accountancy fees and professional advice

HMRC offers simplified flat-rate expenses for vehicles (mileage allowance: 45p/mile for the first 10,000 miles, 25p after) and working from home, which removes the need for detailed records on those items.

VAT: when you need to register

VAT registration is mandatory once your taxable turnover exceeds £90,000 in any rolling 12-month period. You have 30 days to register after crossing the threshold. Once registered, you charge VAT (standard rate 20%) to customers, file quarterly VAT returns, and pay the difference between VAT collected and VAT paid on your business inputs.

You can also register voluntarily below the threshold, useful if your customers are VAT-registered businesses (they can reclaim the VAT you charge), or if you have significant VAT-able input costs you want to reclaim. Some businesses use the Flat Rate Scheme, paying a fixed percentage of turnover rather than tracking every invoice, which can simplify admin.

Payments on account

Once your Self Assessment tax bill exceeds £1,000, HMRC requires payments on account — advance payments towards next year's bill. Two equal instalments are due: 31 January (alongside your current year's balancing payment) and 31 July. Each is 50% of the previous year's tax bill. If your income drops significantly, you can apply to reduce your payments on account through your Self Assessment return or Personal Tax Account. Setting aside 25–30% of income as you earn is the most reliable way to avoid a cash-flow shock at the January deadline.

Key Self Assessment deadlines

Late filing carries an automatic £100 penalty, with further daily and percentage-based penalties beyond three months. Interest accrues on late payments from 1 February.

Sole trader vs limited company

Most self-employed people start as sole traders, simple to set up, no registration at Companies House, and your profits are taxed directly as income. A limited company is a separate legal entity; you pay Corporation Tax (19%–25%) on profits, then pay yourself via a combination of salary and dividends. At higher profit levels (typically above £50,000–£60,000), operating via a limited company can be more tax-efficient, but comes with significantly more admin: annual accounts, confirmation statements, and payroll.

The right structure depends on your profit level, how much you reinvest in the business, your liability concerns, and how much admin you are willing to handle. Most accountants suggest reviewing the question once your self-employment profits consistently exceed £30,000–£40,000 per year.