Self-Employed Tax Calculator (Sole Trader)
Estimate 2026/27 Income Tax, Class 4 National Insurance and take-home pay from annual sole-trader profit.
Class 2 is nil and treated as paid if profit is at least £7,105. Estimate only.
How sole-trader tax is estimated
Income Tax uses the personal allowance, including its taper above £100,000, followed by the basic, higher and additional rate bands.
Class 4 National Insurance is charged on profit bands. Class 2 is nil and treated as paid when profit reaches the stated threshold.
2026/27 assumptions
- Personal allowance: £12,570, tapered above £100,000
- Income Tax: 20%, 40% and 45% bands
- Class 4 NI: 6% from £12,570 to £50,270, then 2%
Frequently asked questions
What profit should I enter?
Enter annual business profit after allowable expenses, before Income Tax and National Insurance.
Is Class 2 NI charged?
Class 2 is nil; it is treated as paid when profit is at least £7,105.
Does this include every relief?
No. It is a planning estimate and does not include every deduction, relief or payment on account.
Self-employed tax in 2026/27: what a sole trader actually keeps
As a sole trader you pay two things on your profit: Income Tax and Class 4 National Insurance — both calculated on profit (income minus allowable expenses), both collected through Self Assessment. The calculator above applies the 2026/27 rules: personal allowance of £12,570, income tax at 20% / 40% / 45%, and Class 4 NI at 6% on profits between £12,570 and £50,270 plus 2% above that. Class 2 NI no longer costs anything: if your profit reaches £7,105, it is treated as paid, protecting your State Pension record for free.
Worked example
On a profit of £40,000: taxable income is £27,430 after the personal allowance, giving £5,486 income tax; Class 4 NI adds £1,646. You keep about £32,868 — roughly £2,739 a month, an effective rate of 17.8%. At £60,000 profit the effective rate rises to 23.1% (£11,432 tax + £2,457 NI, keeping £46,111) — the jump comes from the 40% band starting at £50,270 of income.
What sole traders most often get wrong
- Payments on account ambush: once your bill exceeds £1,000, HMRC asks for 150% in year one — the year’s bill plus a 50% advance by 31 January, and another 50% by 31 July. Budget for it or the first January hurts.
- Expenses reduce both charges. Every legitimate business cost saves you income tax and Class 4 NI — at profits in the 40% band that is 42p per pound spent.
- Pension contributions extend your 20% band and are the main lever self-employed people underuse — there is no employer topping it up for you.
- The £100,000 taper: above £100k profit you lose £1 of personal allowance per £2, creating a ~62% effective marginal zone to ~£125k (tax + NI). Pension contributions in that zone are exceptionally effective.
- Put money aside as you earn: a separate account holding 25–30% of each invoice prevents the classic January crisis.
Additional questions
Sole trader or limited company — which pays less?
At modest profits the gap has narrowed to little; companies add accountancy costs and admin, and dividend tax has tightened. The switch tends to make sense from roughly £40–50k profits, or where you need liability protection or want to retain earnings — run both scenarios with an accountant before deciding.
Do I pay tax on turnover or profit?
Profit. Turnover minus allowable expenses (equipment, travel, home-office share, software, professional fees). Keep records — from the 2026/27 year Making Tax Digital brings quarterly digital updates for incomes over £50,000.
What about VAT?
Separate system: registration becomes compulsory when taxable turnover passes £90,000 in any rolling 12 months. Below that it is optional — sometimes worth it for reclaiming VAT on costs. Use our VAT calculator for the arithmetic.
Written & fact-checked by Łukasz Wójcik — independent developer, not a licensed financial adviser. Last reviewed: 2026-08-17.
Methodology & assumptions
This estimate applies the current published tax, National Insurance and allowance thresholds to the figures you enter — it is a simplified calculation and does not account for personal tax codes, student loan deductions, salary sacrifice schemes or other individual circumstances.
Scope & limitations
This calculator is a free, general-purpose estimation tool. It uses simplified assumptions, does not know your full personal or financial circumstances, and is not a substitute for professional financial, tax or legal advice. Figures can change after publication — always check the current rate or threshold at the source below before relying on a result.
Where to check this yourself
Every rate, threshold and rule used above comes from the bodies below. They are the authority; this page is not. Where a figure here disagrees with a source, the source is right — and we would be grateful if you told us. Links go to official government bodies and to registered charities that give free, impartial guidance; none of them pays us and we take no commission.