Self-Employed Tax in the UK: Complete 2025/26 Guide

Who Needs to Register as Self-Employed?

If you earn more than £1,000 from self-employment in a tax year, you must register with HMRC and file a Self Assessment tax return. This applies whether you run a sole trader business, work as a freelancer, contractor, or have a side hustle alongside your employed income. You should register as soon as you start self-employed work — the deadline is 5 October after the end of the tax year in which you started trading.

Being self-employed means you are responsible for calculating and paying your own tax and National Insurance contributions (NICs). Unlike employees whose tax is deducted through PAYE, you pay HMRC directly — usually twice a year through the payments on account system.

Self-Employed Tax Rates 2025/26

Self-employed people pay Income Tax on their profits (not turnover) using the same bands as employees. You can deduct allowable business expenses before calculating your taxable profit.

National Insurance for the Self-Employed 2025/26

Self-employed people pay two classes of National Insurance, both of which contribute towards your State Pension entitlement and certain other state benefits.

• Class 2 NI: A flat annual amount of £179.40 per year (equivalent to £3.45 per week), paid if your profits exceed the Small Profits Threshold of £6,725. If your profits fall below this threshold, you can choose to pay Class 2 voluntarily to protect your State Pension entitlement.
• Class 4 NI: 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. This is calculated alongside your Income Tax in your Self Assessment return.

For example, if your self-employed profit is £40,000, your Class 4 NI would be: (£40,000 − £12,570) × 6% = £1,645.80, plus your Class 2 of £179.40, giving a total NI bill of around £1,825.

Allowable Business Expenses

You can deduct genuine business expenses from your income to reduce your taxable profit. Common allowable expenses include:

• Office costs: stationery, postage, software subscriptions
• Travel costs: fuel, public transport fares, hotel stays for business trips (not commuting)
• Stock and materials used in your business
• Marketing and advertising: website costs, online ads
• Professional fees: accountant, solicitor, business insurance
• A proportion of home costs if you work from home (using HMRC's simplified flat rate or actual costs)
• Equipment and tools — either in full via Annual Investment Allowance or using capital allowances

Payments on Account

Once your Self Assessment tax bill exceeds £1,000, HMRC requires you to make payments on account — advance payments towards your next year's tax bill. These are due on 31 January and 31 July each year. Each payment is 50% of your previous year's tax liability. This system catches many new self-employed people by surprise, as your first January payment includes both the full prior year's tax AND the first payment on account for the current year.

Key Deadlines to Know

• 5 October: Register for Self Assessment after starting self-employment
• 31 October: Deadline for paper Self Assessment returns
• 31 January: Online Self Assessment filing deadline and payment deadline (including balancing payment + first payment on account)
• 31 July: Second payment on account deadline
• Keep records for 5 years after the 31 January deadline in case HMRC investigates

Making Tax Digital for Income Tax

From April 2026, self-employed people with income over £50,000 must use Making Tax Digital (MTD) compatible software to keep digital records and submit quarterly updates to HMRC. Those earning between £30,000 and £50,000 must comply from April 2027. This will replace the annual Self Assessment return for qualifying individuals with a more regular reporting cycle.

Use our Self-Employed Tax Calculator to estimate your tax and NI bill →