How much tax do self employed people pay in the UK

Understanding what “self-employed tax” means in the UK

When people ask, “How much tax do self employed people pay in the UK?”, they’re usually talking about a bundle of charges rather than one single tax. If you’re self-employed as a sole trader (or in a partnership), the main amounts you may pay are:

Income Tax on your taxable profits, using the same bands as most other income.

National Insurance (mainly Class 4 for the self-employed, and sometimes voluntary Class 2).

Student loan repayments (if you have an outstanding student or postgraduate loan and your income is above the threshold).

And depending on what you do and how much you sell, you might also deal with VAT. VAT isn’t a “profit tax” (it’s charged on sales), but it can affect cashflow and pricing and is a major part of the real-world tax picture for many self-employed people. UK tax rules also differ depending on whether you’re in Scotland for Income Tax purposes (Scottish rates and bands are different from the rest of the UK). :contentReference[oaicite:0]{index=0}

The basics: self-employed tax is based on profit, not turnover

Most self-employed people pay Income Tax and National Insurance on their taxable profit, not on their total sales. In simple terms:

Profit = business income (sales/fees) − allowable business expenses

Allowable expenses are the costs you incur “wholly and exclusively” for business. That commonly includes things like stock, materials, software subscriptions, marketing, professional fees, and (where relevant) business travel. Some costs are partly business and partly personal (for example, home broadband). In those cases, you generally apportion the cost and claim only the business share.

The key takeaway is that two self-employed people can have the same turnover but pay very different tax depending on their expenses and profit margin.

How Income Tax works for the self-employed

Income Tax is charged on your taxable income for the tax year (6 April to 5 April). If you’re self-employed, you normally declare your profits through Self Assessment. The standard Income Tax bands in England, Wales and Northern Ireland (for a typical Personal Allowance) are:

Personal Allowance: up to £12,570 taxed at 0%

Basic rate: £12,571 to £50,270 taxed at 20%

Higher rate: £50,271 to £125,140 taxed at 40%

Additional rate: over £125,140 taxed at 45%

These bands apply to your taxable income after allowances and reliefs, not simply the “headline” profit figure you see in your accounts.

If you live in Scotland for Income Tax purposes, the rates and bands are different (including additional bands and different percentages). You still have the same UK-wide Personal Allowance (unless it’s reduced due to high income), but the tax bands above it vary. :contentReference[oaicite:1]{index=1}

Scottish Income Tax: why it can change the answer

For Scottish taxpayers (on non-savings, non-dividend income), the Scottish rates and bands for 2025 to 2026 shown by GOV.UK include a starter rate and additional bands beyond the UK “basic/higher/additional” structure. For example, the table includes:

Starter rate: £12,571 to £15,397 at 19%

Basic rate: £15,398 to £27,491 at 20%

Intermediate rate: £27,492 to £43,662 at 21%

Higher rate: £43,663 to £75,000 at 42%

Advanced rate: £75,001 to £125,140 at 45%

Top rate: over £125,140 at 48%

This is one reason there isn’t a single universal “self-employed tax rate” across the UK: where you live can change the Income Tax calculation even if your profit is identical. :contentReference[oaicite:2]{index=2}

Your Personal Allowance and the £100,000 “taper”

Most people can earn up to a standard Personal Allowance tax-free (commonly £12,570). However, if your adjusted net income goes above £100,000, your Personal Allowance is reduced by £1 for every £2 above £100,000. It falls to zero once your income reaches £125,140.

This matters for the self-employed because it can create a surprisingly high effective marginal tax rate in that income range: you’re not only paying higher-rate tax, you’re also losing some of your tax-free allowance at the same time. :contentReference[oaicite:3]{index=3}

National Insurance for the self-employed: Class 4 (and what happened to Class 2)

Alongside Income Tax, many self-employed people pay National Insurance Contributions (NICs). The system has changed in recent years, so it’s important to use current rules.

Class 4 NIC is the main ongoing NIC for self-employed profits above certain thresholds. For the 2025 to 2026 tax year, GOV.UK states you pay:

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

2% on profits over £50,270

Class 2 NIC is no longer a mandatory weekly charge for many self-employed people, but it can still matter for protecting your National Insurance record. GOV.UK explains that if your profits are £6,845 or more a year, Class 2 contributions are treated as having been paid to protect your record (so you do not have to pay them). In some situations people may choose to pay Class 2 voluntarily (for example, to fill gaps). :contentReference[oaicite:4]{index=4}

So how much do self-employed people pay overall?

The honest answer is: it depends on your profit, your other income (if any), and whether you’re a Scottish taxpayer. But you can get a good “rule of thumb” by thinking in layers:

Layer 1: Income Tax (0%, 20%, 40%, 45% in the rest of the UK; different bands in Scotland)

Layer 2: Class 4 NIC (6% in the main band, then 2% above the upper limit for 2025/26)

Layer 3 (sometimes): student loan repayments (9% above the plan threshold; plus 6% above the postgraduate threshold if relevant)

Because these stack, the “effective rate” on the next £1 of profit can be higher than many people expect, especially if you’re in higher-rate bands or repaying student loans.

A worked example (England/Wales/NI): profit of £30,000 in 2025/26

Let’s use the standard UK bands for England/Wales/Northern Ireland and assume the person has no other taxable income.

Step 1: Income Tax

If profit is £30,000 and the Personal Allowance is £12,570, then taxable income is £30,000 − £12,570 = £17,430.

At the basic rate of 20%, Income Tax would be 20% × £17,430 = £3,486.

Step 2: Class 4 NIC

Class 4 is charged on profits above £12,570. Profits in the Class 4 main band are £30,000 − £12,570 = £17,430.

At 6%, Class 4 NIC would be 6% × £17,430 = £1,045.80.

Approx total (Income Tax + Class 4 NIC): £3,486 + £1,045.80 = £4,531.80.

This example ignores any other factors (like student loan repayments, marriage allowance, pension contributions, or specific reliefs), but it shows the structure: Income Tax plus Class 4 NIC can easily be several thousand pounds even at modest profits. The relevant tax bands and Class 4 rates/thresholds are set out on GOV.UK. :contentReference[oaicite:5]{index=5}

A worked example: profit of £60,000 in 2025/26 (England/Wales/NI)

Again assume no other taxable income.

Income Tax:

Taxable income = £60,000 − £12,570 = £47,430.

All of that is within the basic rate band up to £50,270, so Income Tax = 20% × £47,430 = £9,486.

Class 4 NIC:

Main Class 4 band profits = £50,270 − £12,570 = £37,700 at 6% = £2,262.

Upper band profits = £60,000 − £50,270 = £9,730 at 2% = £194.60.

Total Class 4 NIC = £2,456.60.

Approx total (Income Tax + Class 4 NIC): £9,486 + £2,456.60 = £11,942.60.

Notice how the NIC rate drops above the upper profits limit, whi