How is self-employed tax calculated in the UK?

Self-employed people pay income tax on profits above the personal allowance (£12,570 in 2026/27) at 20%, 40% or 45%. They also pay Class 2 NI (£3.45/week on profits above £6,725) and Class 4 NI (6% on profits £12,570–£50,270, 2% above). All paid via Self Assessment.

Self-employed tax calculator

Q: What is the difference between Class 2 and Class 4 NI?

Class 2 NI is a flat weekly rate (£3.45/week) paid by self-employed people with profits above the small profits threshold. It counts toward your State Pension. Class 4 NI is profit-based: 6% on profits between £12,570 and £50,270, and 2% above £50,270. It does not directly build State Pension entitlement.

Model profit, income tax and NI using the same tax-year database as our PAYE calculator.

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Last updated 6 April 2026

How self-employed tax works in the UK

Self-employed people pay Income Tax on profits, not turnover. Profit is your business income minus allowable expenses. You report this through Self Assessment after the tax year ends, paying any balancing payment by 31 January.

On top of Income Tax, most self-employed people pay Class 2 and Class 4 National Insurance. Class 2 is a flat weekly amount when profits exceed the small profits threshold; Class 4 is a percentage of profits within set bands.

Worked example: £40,000 profit

With £40,000 profit and no other income, you use the Personal Allowance (£12,570) then pay 20% on the remainder — about £5,486 Income Tax. Class 2 NI is roughly £179 for the year and Class 4 NI about £1,646 on profits in the main band. Total tax and NI near £7,300, leaving roughly £32,700 after tax — but remember payments on account may require paying ahead for the following year.

Payments on account

If your Self Assessment bill exceeds £1,000, HMRC usually asks for payments on account — two instalments in January and July based on the previous year's bill. This catches many new freelancers by surprise. Use our Self Assessment deadlines tool to track key dates.

Frequently asked questions

How is self-employed tax calculated?

You pay Income Tax on profits above the Personal Allowance at 20%, 40%, or 45%, plus Class 2 and Class 4 NI on qualifying profits. All figures are reported and paid via Self Assessment.

What is the difference between Class 2 and Class 4 NI?

Class 2 is a flat weekly charge that counts toward State Pension eligibility. Class 4 is profit-based and does not directly build pension entitlement.

Do I pay tax monthly when self-employed?

No. Most self-employed tax is paid through Self Assessment with a main deadline of 31 January and optional payments on account in January and July.

TaxHelper provides general information based on published HMRC rates and guidance. It is not regulated financial or tax advice. For decisions involving significant sums, complex circumstances, or if you are unsure, speak to a qualified accountant or HMRC directly.