The Pay Packet

Sole trader tax calculator 2026/27

If you are self-employed — a sole trader or freelancer — you are taxed on your profit, not your turnover. Enter your income and expenses to see your Income Tax, National Insurance and what you actually keep, for the 2026/27 tax year.

2026/27. Figures are an estimate before any pension contributions or other income.

Your self-employed year

2026/27
Income
£40,000
Expenses
−£0
Taxable profit
£40,000
Income Tax
−£5,486
Class 4 National Insurance
−£1,646

You keep

£2,739 a month

£32,868

Class 2 National Insurance: £0 — treated as paid, so you still get a qualifying year towards your State Pension.

Your Self Assessment tax bill is £7,131.80 (Income Tax + Class 4). That is an effective rate of 18% on your profit.

Verified · 2026/27
21 June 2026
How this was calculated

We take your trading income and subtract either your allowable expenses or the £1,000 trading allowance to reach your taxable profit. On that profit we apply your Personal Allowance and the Income Tax bands for your region, then Class 4 National Insurance (6% from £12,570 to £50,270, 2% above). Class 2 is £0 — since April 2024 it is treated as paid above the £7,105 Small Profits Threshold. Over £100,000 of profit the Personal Allowance tapers away. Every rate is traced to a dated gov.uk source.

The full method and every source is on our methodology page.

Built & maintained by the Pay Packet team · methodology sourced from HMRC · last reviewed 21 June 2026. About our figures →

How a sole trader is taxed

As a sole trader your business and you are the same person for tax. You pay tax on your profit — your income less your allowable expenses — not on everything that comes in, and not on what you draw out. That profit is added to any other income you have and taxed through Self Assessment.

Two charges apply. Income Tax works exactly as it does for an employee: a £12,570 tax-free Personal Allowance, then 20%, 40% and 45% bands (Scotland sets its own). Class 4 National Insurance is the self-employed equivalent of an employee’s NI, but lighter — 6% on profit between £12,570 and £50,270 and 2% above, against an employee’s 8%. That 2-point gap is why a sole trader on the same money keeps a little more than an employee. Class 2 National Insurance is no longer charged; above the £7,105 Small Profits Threshold it is treated as paid.

If your income is under £1,000 you can use the trading allowance and may not need to tell HMRC at all. Earning a bit on the side as well as a job? Use the employed and self-employed calculator, which stacks the two correctly. Thinking about incorporating? Compare the two routes with the sole trader vs limited company calculator.

Rates here are traced to gov.uk — self-employed National Insurance and Income Tax — and checked for 2026/27.

Self-employed tax questions

How much tax will I pay as a sole trader?
On your taxable profit (income minus allowable expenses) you pay Income Tax — nothing on the first £12,570, then 20% to £50,270, 40% to £125,140 and 45% above — plus Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above. There is no separate tax on a sole trader’s drawings; you are taxed on profit, whether you take it out of the business or not.
Do I still pay Class 2 National Insurance?
No. Since 6 April 2024 no one has to pay Class 2. If your profit is at least the Small Profits Threshold (£7,105 for 2026/27) it is treated as paid, so you still build a qualifying year towards your State Pension at no cost. Below £7,105 you can pay Class 2 voluntarily — about £189.80 a year — to protect your record.
What can I deduct as expenses?
Costs incurred “wholly and exclusively” for the business — stock, tools, travel, a proportion of home and phone costs, software, professional fees and so on. Alternatively, if your income is small you can claim the flat £1,000 trading allowance instead of working out actual expenses. You claim one or the other, not both.
Is the tax different in Scotland?
Income Tax is — Scotland sets its own bands (19% to 48%), which this calculator applies when you choose Scotland. National Insurance, including Class 4, is the same across the whole UK.
When do I pay the tax?
Through Self Assessment. The balancing payment for a tax year is due by 31 January after it ends, and if your bill is £1,000 or more you also make payments on account towards the next year. Our self-assessment tax calculator sets out the dates and amounts.

An estimate for the 2026/27 tax year — guidance, not personal tax advice, and not a substitute for an accountant or your Self Assessment return. It assumes trading profits only, a standard Personal Allowance and no pension contributions. Always check the detail with gov.uk/HMRC.