Self-Employed Tax Guide UK 2026: Rates, Expenses and Self-Assessment
Updated April 2026 · 11 min read
Self-Employment Tax in the UK: What You Actually Pay
There are over 5 million self-employed people in the UK, and tax is the most confusing part of working for yourself. The good news: with proper expense tracking and planning, self-employed people often pay less tax than employees on the same income. Use our tax calculator to estimate your tax bill and our freelance rate calculator to set your rates correctly.
On GBP 50,000 profit: income tax is GBP 7,486, Class 2 NI is GBP 179, and Class 4 NI is approximately GBP 2,254. Total: GBP 9,919 — leaving GBP 40,081 take-home. But this is before allowable expenses, which can significantly reduce your taxable profit.
Expenses: Your Biggest Tax Reduction Tool
Every legitimate business expense reduces your taxable profit pound for pound. At 40 percent marginal rate, a GBP 1,000 expense saves GBP 400 in tax. Track everything: software subscriptions, business travel, phone bills, professional development, home office costs, equipment, and professional memberships. Use the simplified expenses method for home office (GBP 10 to 26 per month based on hours worked) and mileage (45p per mile for first 10,000 business miles).
Setting Aside Tax: The 25-30 Percent Rule
The number one mistake self-employed people make: spending money that should be set aside for tax. Open a separate savings account and transfer 25 to 30 percent of every invoice payment into it immediately. This money is not yours — it belongs to HMRC. Payments on account mean you pay 50 percent of your previous year tax bill in January and July. Plan your cash flow with our budget planner and calculate your true earnings with our salary calculator.
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Frequently Asked Questions
How much tax do self-employed people pay in the UK?
Income tax at 20/40/45 percent on profits (same bands as employed). Class 2 NI at GBP 3.45 per week. Class 4 NI at 6 percent on profits between GBP 12,570 and 50,270, and 2 percent above 50,270. Total tax burden is broadly similar to employment.
What expenses can I claim as self-employed?
Office costs (stationery, phone, internet), travel (business miles at 45p per mile for first 10,000), clothing (uniforms only, not everyday clothes), marketing, professional subscriptions, insurance, accountancy fees, and use of home as office (simplified: GBP 10 to 26 per month based on hours).
When do I need to register for VAT?
When your taxable turnover exceeds GBP 90,000 in any 12-month rolling period. Below this threshold, VAT registration is voluntary. Once registered, you charge VAT on invoices and can reclaim VAT on business purchases. The flat rate scheme simplifies accounting for small businesses.
When is the self-assessment deadline?
Online filing: 31 January following the end of the tax year. For 2025-26 tax year: deadline is 31 January 2027. Paper filing: 31 October 2026. Late filing attracts an automatic GBP 100 penalty, with additional daily penalties after 3 months.
Should I set up a limited company?
Generally beneficial once profits exceed GBP 30,000 to 40,000. A limited company pays corporation tax at 19 to 25 percent instead of income tax at 40 percent. However, extracting profits as dividends adds complexity and cost. Consult an accountant for your specific situation.