A sole trader pays Income Tax and National Insurance on their profit — your income after allowable expenses, not your total turnover. For 2026/27 the first £12,570 of profit is covered by the Personal Allowance, then Income Tax is 20%, 40% and 45% across the bands, and Class 4 NI adds 6% on profit between £12,570 and £50,270 (2% above). Enter your figures above and the calculator shows the bill and the working.
- You're taxed on profit = income − allowable expenses (or the £1,000 trading allowance, whichever is better).
- Class 4 NI: 6% on profit £12,570–£50,270, then 2% above.
- Class 2 NI is no longer a separate charge — profit above £7,105 is "treated as paid".
- File and pay your 2026/27 Self Assessment by 31 January 2028; a payment on account may also fall due 31 July.
How sole trader tax is calculated
As a sole trader you and your business are the same legal person, so there's no corporation tax — you pay tax on the business profit through Self Assessment. The calculation runs in three steps:
- Work out profit — total self-employed income minus allowable expenses. Instead of itemising expenses you can deduct the flat £1,000 trading allowance; use whichever leaves you better off.
- Income Tax — your profit (stacked on top of any salary or pension) is taxed at 20%, 40% then 45% above the £12,570 Personal Allowance, exactly as the calculator shows.
- National Insurance — Class 4 NI is charged on the profit at 6% then 2%. Class 2 is £0 but still earns your State Pension credit once profit is over £7,105.
The £1,000 trading allowance
If your self-employed income for the year is £1,000 or less, it's usually tax-free and you don't need to tell HMRC. Above £1,000 you must register for Self Assessment, but you can still choose to deduct the £1,000 allowance instead of your actual expenses — which wins if your real costs are lower than £1,000. Switch the "deduct for expenses" option above to compare both.
When do I pay?
Self Assessment runs on the tax year (6 April 2026 to 5 April 2027 is "2026/27"). The return and any tax are due by 31 January 2028. If your bill is over £1,000 you'll usually also make payments on account — two advance instalments towards next year's bill, due 31 January and 31 July.
Making Tax Digital from April 2026
From 6 April 2026, sole traders whose gross self-employed and property income is over £50,000 must keep digital records and send HMRC quarterly updates under Making Tax Digital for Income Tax. Because the test is on gross income, not profit, it can catch traders on thin margins — check with the qualifying-income checker.
Worked example
Sam is a self-employed plumber. In 2026/27 he invoices £42,000 and has £7,000 of allowable expenses (van, fuel, tools, insurance), so his profit is £35,000.
| Step | Calculation | Amount |
|---|---|---|
| Profit | £42,000 − £7,000 | £35,000 |
| Income Tax | (£35,000 − £12,570) × 20% | £4,486 |
| Class 4 NI | (£35,000 − £12,570) × 6% | £1,345.80 |
| Class 2 NI | profit above £7,105 → treated as paid | £0 |
| Total to set aside | Income Tax + NI | £5,831.80 |
Frequently asked questions
Do I pay tax on turnover or profit?
Profit. You deduct allowable business expenses (or the £1,000 trading allowance) from your income first, and Income Tax and National Insurance are charged on what's left.
What National Insurance do sole traders pay in 2026/27?
Class 4 NI at 6% on profit between £12,570 and £50,270, then 2% above. Class 2 is no longer a separate charge — profit above the £7,105 Small Profits Threshold is treated as paid and still counts towards your State Pension.
What if I have a job as well as being self-employed?
Enter your salary in the "other taxable income" box. Your employment income uses your Personal Allowance and lower tax bands first, so the profit is taxed at your marginal rate on top — which is what the calculator does.
When is the tax due?
For the 2026/27 tax year, your Self Assessment return and payment are due by 31 January 2028. If your bill is over £1,000 you'll usually also make payments on account on 31 January and 31 July.
Are these figures official?
The rates and thresholds come from HMRC's published 2026/27 figures on gov.uk. This is an independent estimator to help you plan — it isn't an HMRC service and doesn't replace your tax return.
Sources: Income Tax rates and Personal Allowances, Self-employed National Insurance rates (gov.uk), verified 11 June 2026. Estimates for information only — not regulated tax advice.