Self-Employed Tax Calculator

As a sole trader you're taxed on your profit, income minus allowable business expenses, not your turnover. The same personal allowance and Income Tax bands apply as for employees (£12,570 tax-free, then 20%, 40%, 45%). On top you pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above. Class 2 NI is now voluntary for most, though paying it can protect your State Pension if profits are low.

You only pay tax on profit, so claiming every legitimate expense directly reduces it. Common ones include stock and materials, a proportion of home and phone costs, travel, equipment (via capital allowances or the Annual Investment Allowance), professional fees and software. If your turnover is under £1,000 you may use the trading allowance instead of expenses. Keep records, HMRC can ask for evidence.

If your Self Assessment bill exceeds £1,000, HMRC collects payments on account towards the next year. By 31 January you pay the full bill plus 50% in advance, and a further 50% by 31 July. So your first January can be around 150% of the actual tax, budgeting roughly 30% of profit as you earn it avoids a nasty surprise.

Register by 5 October after the tax year you started. File online and pay by 31 January; the second payment on account is due 31 July. Missing the filing deadline triggers an automatic £100 penalty, with more added over time, plus interest on late tax. Making Tax Digital for Income Tax is also being phased in for higher-income sole traders.

• Not setting tax aside. Spending gross income leaves you short in January. Save ~30% as you go.
• Forgetting payments on account. The first bill includes 50% towards next year, budget for ~150%.
• Missing allowable expenses. Every unclaimed expense is profit you pay tax on. Track them all year.
• Filing late. A £100 penalty applies immediately, even if no tax is due. File on time.