How much can I earn before paying tax self employed UK

What “earning before paying tax” really means when you’re self-employed

When people ask “How much can I earn before paying tax self-employed UK?”, they’re usually trying to figure out a simple number. In reality, there are a few different “lines” you might cross, and each one triggers something different:

1) A reporting line (when you must tell HMRC / submit a Self Assessment return).

2) An Income Tax line (when you actually start paying Income Tax).

3) A National Insurance line (when you start paying Class 4 National Insurance on profits).

4) Cash-flow lines (payments on account, and possibly VAT registration if you grow).

So the best answer depends on whether you mean “before I have to register/file”, “before I pay Income Tax”, or “before I pay anything at all”. The good news: once you understand how the main thresholds work, you can predict your tax pretty accurately and avoid nasty surprises in January.

The two big concepts: turnover vs profit

Most thresholds for self-employed people are based on your profit (income minus allowable business expenses), not your total sales (turnover). But a couple of important rules use gross income/turnover instead.

Turnover (or gross income) is the total amount you invoice or receive from customers.

Profit is what’s left after subtracting allowable expenses that are “wholly and exclusively” for the business (for example: tools, stock, software, a business phone proportion, mileage, etc.). :contentReference[oaicite:0]{index=0}

Why it matters: two people can each “earn” £20,000 in sales, but if one has £2,000 of legitimate expenses and the other has £10,000, their taxable profit — and tax bill — can look very different.

Tax year basics (UK) and why the date matters

In the UK, Income Tax runs on a tax year from 6 April to 5 April. The rules and thresholds we’re talking about here are for the 2025/26 tax year (6 April 2025 to 5 April 2026), unless stated otherwise. :contentReference[oaicite:1]{index=1}

This matters because your “how much can I earn” question resets every tax year. If you start trading in February, you might have only a couple of months’ income in one tax year — then a full year in the next.

The first “line”: the £1,000 trading allowance and when you must file

If you’re doing a small side hustle, freelancing occasionally, or trying a new business idea, the earliest threshold you’ll hear about is the £1,000 trading allowance.

The trading allowance is a tax exemption of up to £1,000 a year for individuals with trading income (including self-employment and some casual services). If your gross trading income is £1,000 or less in a tax year, you generally do not need to tell HMRC (with some exceptions). :contentReference[oaicite:2]{index=2}

Closely linked to this is the Self Assessment filing trigger. HMRC’s guidance says you must usually send a Self Assessment tax return if you were self-employed as a sole trader and earned more than £1,000 (again, this is before deducting expenses). :contentReference[oaicite:3]{index=3}

So can you earn £1,000 tax-free as self-employed?

Often, yes — but it depends what you mean by “tax-free” and what your situation looks like.

If you have £1,000 or less of total trading income in the tax year, the trading allowance can cover it, and you often don’t have to file a return just because of that income.

If you earn more than £1,000, you’re likely into Self Assessment territory (or at least you need to check the rules carefully), even if you won’t end up owing tax after expenses and other allowances. :contentReference[oaicite:4]{index=4}

Important detail: the £1,000 trading allowance is based on gross income, not profit. So if you earn £1,200 and have £400 of expenses, you’re still over the £1,000 gross line.

The second “line”: the Personal Allowance (when Income Tax usually starts)

For many self-employed people, the next key number is the Personal Allowance. In 2025/26, the standard Personal Allowance is £12,570 — this is the amount of income you do not have to pay Income Tax on (subject to certain conditions like high income). :contentReference[oaicite:5]{index=5}

In simple terms, if your total taxable income for the year (from self-employment and any other sources combined, after allowable deductions) is below £12,570, you usually won’t pay Income Tax.

But two big “gotchas” can apply:

1) Your Personal Allowance can be reduced if your income is over £100,000. It tapers down as income rises above that level. :contentReference[oaicite:6]{index=6}

2) “Total taxable income” isn’t the same as your sales. It’s your profit (after expenses) plus any other taxable income you have.

Income Tax bands: how much tax you pay once you pass £12,570

Once your taxable income exceeds the Personal Allowance, you generally pay tax in bands. For many people in the UK, the basic rate is 20% up to the basic rate limit (with higher rates above that). In current law for the relevant period, the basic rate limit is £37,700, and the higher-rate threshold is aligned to £50,270 when combined with the Personal Allowance. :contentReference[oaicite:7]{index=7}

So if you’re self-employed and your taxable income is, say, £30,000, you don’t pay 20% on all £30,000. You pay 0% on the first £12,570 (assuming you have the full allowance), and 20% on the portion above it.

Also note: if you live in Scotland, income tax rates and bands on non-savings/non-dividend income differ (your Personal Allowance is still UK-wide). GOV.UK publishes PAYE rate tables that show the Scottish bands and rates for the year. :contentReference[oaicite:8]{index=8}

The third “line”: National Insurance for the self-employed (Class 4)

Even if your Income Tax is low (or zero), National Insurance can come into play once profits rise.

For 2025/26, GOV.UK’s self-employed National Insurance guidance states:

• If your profits are £6,845 or more, Class 2 contributions are treated as having been paid (so you don’t pay Class 2 in the usual way, but your NI record can still be protected). :contentReference[oaicite:9]{index=9}

• If your profits are more than £12,570, you must pay Class 4 National Insurance. :contentReference[oaicite:10]{index=10}

The Class 4 rates for 2025/26 are:

• 6% on profits over £12,570 up to £50,270

• 2% on profits over £50,270 :contentReference[oaicite:11]{index=11}

So, a rough rule of thumb is: once your self-employed profits go above £12,570, you’re not just thinking about Income Tax — you’re also thinking about Class 4 NI.

Putting it together: common “how much can I earn” scenarios

Scenario A: You only have a small side hustle

Let’s say you sell crafts at markets or do occasional freelance work and make £800 in the whole tax year.

In many cases, the £1,000 trading allowance can cover this, and you may not need to register or file just because of that income. :contentReference[oaicite:12]{index=12}

In plain English: you can often earn up to £1,000 from trading activities without getting pulled into Self Assessment.

Scenario B: You earn more than £1,000 but your profit is still low

Suppose you make £3,000 in sales, but you had £2,000 of legitimate expenses (materials, platform fees, postage), leaving £1,000 profit.

You’re above the £1,000 gross line, so you may need to file a return. But your profit is £1,000, which is below the £12,570 Personal Allowance, so you’d usually pay no