If you’re self-employed in the UK, your tax obligations are different from those of employees. Understanding how much tax you may need to pay can help you avoid unexpected bills and plan your finances effectively.
Tax rules for self-employed individuals are administered by HM Revenue and Customs.
Income Tax for the self-employed
Self-employed individuals usually pay Income Tax on their profits (not total income). Profits are calculated as:
Total income – allowable business expenses = taxable profit
Income Tax is charged according to the UK tax bands set by the UK Government.
For the current tax year:
- Personal Allowance: up to £12,570 tax-free
- Basic rate: 20% on income above the allowance
- Higher rate: 40% on higher earnings
- Additional rate: 45% on the highest income levels
National Insurance contributions
Self-employed individuals may also need to pay National Insurance:
- Class 2 National Insurance (if profits exceed the threshold)
- Class 4 National Insurance based on profit levels
These contributions help build eligibility for certain state benefits and pensions.
Registering as self-employed
You must register for Self Assessment with HM Revenue and Customs if you earn more than £1,000 from self-employment in a tax year.
Registration should usually be completed by 5 October following the end of the tax year in which you started trading.
When tax is paid
Most self-employed individuals pay tax through the Self Assessment system, with key deadlines including:
- 31 January: Online tax return and payment deadline
- 31 July: Second payment on account (if applicable)
Planning ahead for these deadlines can help avoid penalties and interest.
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