If you're self-employed in the UK — whether you're a sole trader, freelancer, or contractor — your tax situation works very differently from someone on a salary. You don't have an employer deducting tax at source through PAYE. Instead, you report your income and pay tax through Self Assessment.
Here's a clear breakdown of exactly what you pay, how it's calculated, and how to keep more of what you earn.
As a self-employed person in the UK, you're liable for three things:
1. Income Tax — on your taxable profits above the personal allowance.
2. Class 4 National Insurance — paid on your profits, like income tax.
3. Class 2 National Insurance — a flat weekly rate if your profits exceed the small profits threshold.
| Taxable Profit | Rate |
|---|---|
| Up to £12,570 (personal allowance) | 0% |
| £12,571 – £50,270 | 20% (Basic rate) |
| £50,271 – £125,140 | 40% (Higher rate) |
| Over £125,140 | 45% (Additional rate) |
You only pay income tax on your profit — not your total turnover. Allowable expenses are deducted first.
| Type | Rate | On what |
|---|---|---|
| Class 2 | £3.45/week | Profits above £12,570 |
| Class 4 | 9% | Profits between £12,570–£50,270 |
| Class 4 | 2% | Profits above £50,270 |
See exactly what you'd owe with our free calculator
Open UK Tax Calculator →One of the biggest advantages of self-employment is being able to deduct business expenses from your income before tax is calculated. Common allowable expenses include:
Office costs — stationery, software, printer ink. If you work from home, you can claim a portion of your utility bills.
Travel — mileage, public transport, parking. You cannot claim your normal commute, but client visits and business trips qualify.
Equipment — laptops, cameras, tools — anything used solely for your business.
Phone and internet — the business-use portion of your bills.
Marketing — website costs, advertising, business cards.
The key rule is that expenses must be wholly and exclusively for business to be allowable.
You must register for Self Assessment with HMRC if you earn more than £1,000 from self-employment in a tax year. Key dates to remember:
5 April — end of the tax year.
31 October — paper tax return deadline.
31 January — online tax return and payment deadline.
Missing the January 31st deadline incurs an automatic £100 penalty, with further penalties for continued delays.
One thing that catches many new self-employed people off guard: HMRC requires you to make advance payments towards next year's tax bill, known as Payments on Account. These are due in January and July and are each calculated as 50% of your previous year's tax bill.
Calculate your self-employed take-home pay
Try the Tax Calculator →