Self-employed tax calculator
Figures Last checked Where these come from
On £50,000 of profit, a sole trader owes £9,732 — £7,486 income tax and £2,246 Class 4 National Insurance, keeping £40,268. But the first 31 January brings £14,598, because the first payment on account falls due the same day. Class 2 is not charged at all.
Class 2 is not charged, and most calculators still charge it
Since the 2024 reform, GOV.UK is explicit: with profits of £7,105 or more, "Class 2 contributions are treated as having been paid… This means you do not have to pay Class 2 contributions". Your National Insurance record is protected and nothing changes hands.
Below that threshold nothing is due either — but nothing is credited. Voluntary Class 2 costs £3.65 a week, £189.80 for a full year, and buys a qualifying year towards the state pension. Whether that is worth paying depends on how many qualifying years you already have, which is a question for HMRC rather than for a calculator.
The January figure is the one that matters
A tax bill over £1,000 triggers payments on account: GOV.UK sets each at "half of the tax you owed last year", due on 31 January and 31 July. The first of them falls on the same day as the balancing payment for the year just ended.
So a first profitable year is settled at roughly 150% of the tax due — here £14,598 against a £9,732 bill. It is not an extra charge and it evens out from the second year, but it is the single most common self-employed cash-flow surprise, and it is why this page leads with the January number rather than burying it.
Compared with being employed
On the same £50,000, an employee pays £2,994 of Class 1 National Insurance against a sole trader's £2,246 of Class 4 — £749 less. Income tax is identical on the same taxable amount; it is only National Insurance that differs.
That is the arithmetic and not the whole picture. Employment carries sick pay, holiday pay, an employer pension contribution and notice; self-employment carries none of them. The take-home pay calculator works out the employed side if you want them side by side.
What catches people out
- Most self-employed people no longer pay Class 2 National Insurance, and a great many calculators still charge it. Since the 2024 reform, profits at or above £7,105 have Class 2 treated as having been paid — the record is protected and there is nothing to hand over. If a calculator adds a weekly Class 2 line to your bill, it is inventing a charge that does not exist.
- The figure that ruins a first profitable year is not the tax bill — it is the January total. Once your liability reaches £1,000 you also pay the first instalment towards next year at the same time, so 31 January brings the whole of this year plus half again. Budgeting for the bill and not for the payment on account is the single most common self-employed cash-flow mistake.
- Enter profit, not turnover. Profit is what is left after allowable expenses, and it is what both income tax and Class 4 are charged on. Putting your invoiced total in here will overstate the bill substantially.
- Below £7,105 of profit nothing is due — but nothing is credited either. Voluntary Class 2 costs £3.65 a week, £189.80 for the year, and buys a qualifying year towards the state pension. Whether that is worth it depends on how many qualifying years you already have, which is a question this page cannot answer and HMRC can.
- Income tax on trading profit is devolved but Class 4 National Insurance is not. A Scottish sole trader pays Scottish income tax rates on the same profit and identical Class 4 — so comparing two nations means comparing only part of the bill.
Questions
Do I still pay Class 2 National Insurance?
Almost certainly not. GOV.UK states that with profits of £7,105 or more, Class 2 contributions are treated as having been paid — your National Insurance record is protected without you paying anything.
Below that threshold nothing is due either, but nothing is credited. You can pay voluntarily at £3.65 a week if you want the qualifying year.
Why is my January bill more than the tax I owe?
Because of payments on account. Once your Self Assessment liability reaches £1,000, HMRC asks for half of it again as an advance on next year — and the first of those instalments falls due on the same day as the balancing payment for the year just ended.
So a first profitable year is settled at roughly 150% of the tax due. The second instalment follows on 31 July. It is not an extra charge; it is next year's tax brought forward, and it evens out from the second year onwards.
How is this different from being employed?
Income tax is the same on the same taxable amount. National Insurance is not: an employee pays Class 1, a sole trader pays Class 4, and the Class 4 rates are lower. There is also no employer contribution and no Class 2 to pay.
On the same headline figure a sole trader therefore keeps more — but they also have no sick pay, no holiday pay, no employer pension contribution and no notice period. Compare the two with the take-home pay calculator if it helps.
Does this include my student loan?
It can — student loan repayments are collected through Self Assessment for the self-employed, and they are calculated on the same profit.
Note that they are not covered by payments on account: GOV.UK lists student loan repayments alongside capital gains as part of the balancing payment, so they arrive in one lump each January rather than being spread.
What counts as an allowable expense?
Costs incurred wholly and exclusively for the business. What qualifies varies by trade and there are simplified flat rates for things like working from home and vehicle mileage.
This page takes your profit as given rather than working it out — deciding what is allowable is a judgement about your particular business, and GOV.UK's expenses guidance is the place for it.
Sources
Work out the next thing
- Dividend taxDividends stacked on your income and split across the bands — with the allowance treated as a nil-rate band rather than a deduction, which is where most tools go wrong.
- Hourly rate to salaryHourly, contractor day rate and annual salary converted in any direction — with the weeks you are paid kept separate from the weeks you work.
- Child BenefitHow much is clawed back above £60,000, and the marginal rate — which is the one UK threshold that depends on how many children you have.