Self-Employed Income Tax Rates: 2026/27 UK Guide

Updated for 2026/27. Self-employed people pay Income Tax on taxable profit, not turnover or drawings. The rates depend on total income and where in the UK you live. National Insurance is calculated separately.

England, Wales and Northern Ireland rates

With the standard £12,570 Personal Allowance:

• 0%: income covered by the Personal Allowance, normally up to £12,570
• 20% basic rate: taxable income up to £37,700, equivalent to total income from £12,571 to £50,270 with the full allowance
• 40% higher rate: taxable income from £37,701 to £125,140
• 45% additional rate: taxable income above £125,140

The Personal Allowance reduces by £1 for every £2 of adjusted net income over £100,000 and is normally eliminated at £125,140.

Scottish Income Tax rates

Scottish rates apply to self-employed trading profit and other relevant non-savings, non-dividend income. For 2026/27, taxable income after allowances uses:

• 19% starter rate up to £3,967
• 20% basic rate from £3,968 to £16,956
• 21% intermediate rate from £16,957 to £31,092
• 42% higher rate from £31,093 to £62,430
• 45% advanced rate from £62,431 to £125,140
• 48% top rate above £125,140

UK-wide rates continue to apply to savings interest and dividends. Scottish taxpayer status depends mainly on where you live, not where customers are located.

Calculating taxable profit

Start with gross business income and deduct allowable expenses, capital allowances and relevant adjustments. If eligible, use the £1,000 trading allowance instead of actual expenses. Private costs, drawings, Income Tax and most capital spending are not ordinary revenue deductions.

Example for England, Wales or Northern Ireland

A sole trader has £65,000 turnover and £20,000 allowable expenses, giving £45,000 profit. With no other income and the full Personal Allowance, £12,570 is tax-free and £32,430 falls within the 20% basic-rate band. Income Tax is £6,486 before other reliefs, plus any Class 4 National Insurance.

Example with employment income

A taxpayer earns £42,000 salary and £20,000 self-employed profit. PAYE uses much of the basic-rate band, so part of the business profit falls at 40%. Self Assessment combines both sources and credits PAYE already deducted.

Class 4 National Insurance for 2026/27

• No Class 4 on profits up to £12,570
• 6% on profits from £12,570 to £50,270
• 2% on profits above £50,270

If profits are at least £7,105, Class 2 is treated as paid to protect the National Insurance record. Below that, voluntary Class 2 at £3.65 a week may be considered. Class 4 does not itself build State Pension entitlement.

Payments on account

Self Assessment may require two advance instalments toward the following year’s Income Tax and Class 4. Each is normally half the prior year’s relevant liability, due on 31 January and 31 July. The first bill can therefore include the balancing payment and a first advance instalment together.

Savings and dividends

Self-employed status does not change the separate savings and dividend rules. The Personal Savings Allowance is up to £1,000 for a basic-rate taxpayer, £500 for a higher-rate taxpayer and nil for an additional-rate taxpayer. Dividend income uses its own allowance and rates and can push total income into a higher band.

High-income Personal Allowance taper

Adjusted net income includes business profit plus salary, rent, savings, dividends and other taxable sources, with specific adjustments for gross Gift Aid and qualifying relief-at-source pension contributions. The allowance taper creates a high effective marginal rate between £100,000 and £125,140.

Losses

Trading losses can sometimes be carried forward, set against other income, carried back or relieved in other statutory ways. Conditions, caps and timing differ. A low-profit year is not automatically tax-free if other income exists, and a loss claim can affect future tax and payments on account.

Tax deadlines for 2026/27

• Register by 5 October 2027 where required
• Paper return by 31 October 2027
• Online return and balancing payment by 31 January 2028
• Second payment on account by 31 July 2028 where applicable

How much to reserve

A simple percentage of turnover can be misleading because expenses, other income, bands and payments on account vary. Prepare a profit forecast, add other income, calculate Income Tax and National Insurance, then include the next payment on account. Keep the tax reserve separate from operating cash.

Making Tax Digital

MTD for Income Tax begins from April 2026 above £50,000 qualifying income, April 2027 above £30,000 and April 2028 above £20,000. Entry is based broadly on gross qualifying self-employment and property income, not taxable profit.

Tax-planning checklist

1. Forecast turnover and allowable expenses.
2. Add employment, rent, savings, dividends and foreign income.
3. Confirm UK regional tax status.
4. Calculate adjusted net income and allowance taper.
5. Add Class 4 and payments on account.
6. Review genuine pension, Gift Aid and loss relief before deadlines.
7. Update the forecast as profit changes.

Use HMRC’s official 2026/27 Income Tax rates and self-employed National Insurance rates. Our National Insurance guide explains Class 2 and Class 4.

Frequently asked questions

Do sole traders pay Corporation Tax?

No. They pay Income Tax and relevant National Insurance on business profit. A limited company pays Corporation Tax.

Is every pound over £50,270 taxed at 40%?

Only the portion in the higher-rate band; lower portions retain their applicable rates.

Are Scottish rates based on the client’s address?

No. They depend primarily on the taxpayer’s residence status within the UK.

This guide is general information. Total income, residence and reliefs determine the final bill.