Written by the TaxTune Editorial Team · Reviewed by our qualified accountants · Updated for 2026
The quick answer You pay tax on your profit, which is income minus allowable expenses. The first £12,570 is usually tax free through the personal allowance, then 20% up to £50,270, 40% up to £125,140 and 45% above that. On top, you pay Class 4 National Insurance on profits above £12,570.

How your bill is worked out, step by step

  1. Work out your profit. Total your income, then take off allowable expenses. The result is your taxable profit.
  2. Apply the personal allowance. The first £12,570 of income is normally tax free.
  3. Apply the income tax bands. 20% on profit up to £50,270, 40% up to £125,140, then 45%.
  4. Add Class 4 National Insurance. Charged at 6% on profits between £12,570 and £50,270, then 2% above that.
  5. Remember the timing. The bill is due by 31 January, and payments on account may apply if it is over £1,000.

A worked example

Aisha makes £45,000 of profit. Her first £12,570 is tax free. The remaining £32,430 is taxed at 20%, giving £6,486 of income tax, plus Class 4 National Insurance at 6% on the same band. Setting aside roughly a third of her profit each month keeps her comfortably ahead of the bill.

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Frequently asked questions

How much tax do I pay when self employed?

You pay income tax on your profit after the £12,570 personal allowance, at 20% up to £50,270, 40% up to £125,140 and 45% above. You also pay Class 4 National Insurance on profits above £12,570.

How much should I set aside for tax?

A common rule of thumb is to set aside around 25% to 30% of your profit, more if you are a higher rate taxpayer. Putting it in a separate account each month avoids a January shock.

Do I pay National Insurance when self employed?

Yes. Class 4 National Insurance is charged at 6% on profits between £12,570 and £50,270, then 2% above. Class 2 is no longer required to be paid by most self employed people.

Is my whole income taxed?

No. You are taxed on profit, which is income minus allowable expenses, and only after the personal allowance. Claiming your expenses correctly reduces the bill.

When do I pay the tax?

By 31 January following the tax year. If your bill is over £1,000 you also make payments on account toward the next year, due 31 January and 31 July.