Guides

How much tax a sole trader pays: Income Tax and National Insurance

Checked against GOV.UK on 18 October 2026

General guidance taken from GOV.UK, not advice about your own tax affairs. HMRC's rules change, so the GOV.UK pages listed at the end are the final word.

As a sole trader you pay Income Tax and Class 4 National Insurance on your profits: your self-employed income minus your allowable expenses. For the 2026 to 2027 tax year (6 April 2026 to 5 April 2027), if you live outside Scotland and have no other income, that means nothing on the first £12,570, then 20% Income Tax plus 6% National Insurance on profits up to £50,270. Most self-employed people pay both through Self Assessment.

Income Tax

Income Tax is worked out on all your taxable income together: your self-employed profits, plus any wages, most pensions, rental income and other taxable income. Your tax-free Personal Allowance is taken off the total, and the rest is taxed in bands.

For 2026 to 2027 in England, Wales and Northern Ireland, with the standard Personal Allowance:

Band Taxable income Rate
Personal Allowance up to £12,570 0%
Basic rate £12,571 to £50,270 20%
Higher rate £50,271 to £125,140 40%
Additional rate over £125,140 45%

If your income is over £100,000, your Personal Allowance goes down by £1 for every £2 above £100,000, so it's zero from £125,140.

If you live in Scotland

You pay Scottish Income Tax, with different bands. For 2026 to 2027, with the standard Personal Allowance:

Band Taxable income Rate
Personal Allowance up to £12,570 0%
Starter rate £12,571 to £16,537 19%
Basic rate £16,538 to £29,526 20%
Intermediate rate £29,527 to £43,662 21%
Higher rate £43,663 to £75,000 42%
Advanced rate £75,001 to £125,140 45%
Top rate over £125,140 48%

National Insurance

Which National Insurance you pay depends on your profits.

If your profits are £7,105 or more, Class 2 contributions are treated as having been paid, which protects your National Insurance record without you paying them. If your profits are more than £12,570, you pay Class 4 for 2026 to 2027:

  • 6% on profits over £12,570 up to £50,270
  • 2% on profits over £50,270

If your profits are less than £7,105, you don't have to pay anything, but you can choose to pay voluntary Class 2 contributions, at £3.65 a week for 2026 to 2027. GOV.UK gives the reason: gaps in your National Insurance record can mean you don't have enough qualifying years for the State Pension (you usually need at least 10) or for certain benefits. Your State Pension forecast shows whether paying would help you.

A worked example

This example is worked out from the rates above; it isn't one of GOV.UK's. Say your profit for 2026 to 2027 is £30,000, you live in England, you get the standard Personal Allowance and you have no other income:

  • Income Tax: 20% of £17,430 (£30,000 minus £12,570) = £3,486
  • Class 4 National Insurance: 6% of the same £17,430 = £1,045.80
  • Total: £4,531.80

If you also have a job, your wages are added to your profits before the Income Tax bands are applied, so your own figure will differ.

To work out your own figure from your profit, use the self-employed tax calculator. It covers both tax years and Scotland, and assumes your profit is your only income.

For your 2025 to 2026 return

The return for the tax year that ended on 5 April 2026, and the tax you owe for it, are due by 11:59pm on 31 January 2027 if you file online. For that year:

  • Income Tax outside Scotland: the same as 2026 to 2027: a £12,570 Personal Allowance, 20% up to £50,270, 40% up to £125,140, and 45% above.
  • Class 4 National Insurance: the same as 2026 to 2027: 6% between £12,570 and £50,270, and 2% above.
  • Class 2: the Small Profits Threshold was £6,845 a year, and the Class 2 rate £3.50 a week.
  • Scotland had different bands: starter rate 19% from £12,571 to £15,397, basic 20% to £27,491, intermediate 21% to £43,662, higher 42% to £75,000, advanced 45% to £125,140, and top 48% above.

How you pay

If you're self-employed, GOV.UK says you may pay Income Tax and National Insurance through Self Assessment, filling in a tax return every year. You must fill one in if you earned more than £1,000 from self-employment.

On top of the bill for the year just ended, you'll usually make payments on account towards the next one, including Class 4 National Insurance, unless last year's tax was less than £1,000 or more than 80% of it was paid outside Self Assessment. See payments on account.

Sources