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How much tax do the self-employed pay?

  • 3 min read
  • Last updated 19 Jan 2023

Just joined the self-employed club? Then you’re probably wondering ‘how much tax do self-employed pay?’ Let us help you with that!

First of all, what taxes do the self-employed pay?

Before diving straight into how much the self-employed pay in taxes, it’ll help to understand what type of taxes the self-employed have to pay. So here we are:

  1. Income tax: Just like if you’re employed for a company, if you’re self-employed, you have to pay income tax on your regular earnings. 
  1. National insurance: If you’re self-employed, you’ll have to pay two types of national insurance: class 2 and class 4.

How do the self-employed pay their taxes?

The self-employed pay their taxes through a Self Assessment tax return. This is an online or paper form that lets HMRC know how much income and profit you’ve earned throughout the year.

A tax return has to be filed annually unless you unregister for self-employment.

Do I pay tax in my first year of self-employment?

If you are newly self-employed, you have to fill in your Self Assessment tax return and pay tax by 31st January following the year that you started running your business. So, if you begin trading in May 2023, you have to submit a Self Assessment in January 2025. This is because May 2023 falls under the 2023/24 tax year.

If you’re filing your first self-employment tax return (hooray!), you’ll want to make note of these important dates:

  • 6th April – 5th April: this is when the tax year begins and ends
  • 5th October: this is the deadline for registering for self-employment 
  • 31st January: this is the deadline for filing your Self Assessment tax return

So, how much tax do the self-employed pay?

And now. The moment we’ve all been waiting for! How much tax do the self-employed pay? 🥁

Well, sorry to disappoint, but there’s no set figure that all self-employed people pay. Surely that would be *extremely* unjust since someone earning £200,000 would pay the same tax as someone who earns £20,000. 😅

However, here are some self-employed tax facts that you may want to know if you’re joining the self-employed club. 👇

Income tax

The income tax rates for the self-employed are exactly the same as the rates for employed people. But there is still a difference. Self-employed people only pay income tax on their profit, not their total earnings like employed people.

Par exemple:

Julietté is a self-employed (highly successful) pastry chef. 🧑‍🍳

She made a total of £150,000 for the year, but £12,000 of this was spent on bags of flour, so her profit is £138,000. She’ll be taxed on the £138,000, not the entire £150,000.

As Juliette’s income has gone over £125,000, she’s lost all of her personal allowance. Usually, everyone’s entitled to a £12,570 personal allowance, however, this is reduced by £1 for every £2 over £100,000.

Get an estimate of your taxable income with our income tax calculator below:

Your situation

Outlined number oneOutlined number one
I am
Annual self-employed income
Self-employed expenses
?

Tax and profit

Outlined number two
  • Total earnings
    £50,000
    £1,000 tax-free Trading Allowance
    ?
  • Tax to pay
    £10,994
    £7,286 income tax
    £159 class 2 National Insurance
    £3,549 class 4 National Insurance
  • What you’re left with
    £39,006

How your income tax is calculated

When you’re self-employed, you have to pay your income tax and national insurance contributions yourself in your annual Self Assessment. Our calculator helps you quickly assess how much you owe.

However you may be eligible for a tax refund when:

  1. You already made tax payments for the year but your annual income ended up less than planned
  2. You have done things that qualify for a tax relief (made private pension contributions, given to charity, etc.)

In your case when you earn £50,000:

Income tax breakdown

You pay no income tax on first £12,570 that you make

You pay £7,286 at basic income tax rate (20%) on the next £36,430

National insurance contributions breakdown

No contributions on the first £9,568 that you make

You pay £3,549 in contributions (at 9%) on the next £39,432 that you make

You pay £159 in NI Class 2 contributions

Allowable expenses 

Self-employed people can deduct what is called ‘allowable expenses’ from their taxable profit to reduce their tax bill. These are essential costs to run your business i.e, office equipment such as stationery and desks (in Juliette’s case, bags of flour).

Want to know what you can claim as a business expense? Find out here!

National Insurance

Both employed and self-employed people pay national insurance. But there are some differences. 

How much national insurance you pay depends on your employment status (and how much you earn).

For the self-employed, there are two types of national insurance classes:

  • Class 2 if your profits are more than £11,908 a year
  • Class 4 if your profits are £11,909 or more a year

Maxing tax digital

We know we said the self-employed file their taxes via paper or online, and it is true. But this is changing.

Soon(ish), you’ll no longer be able to use HMRC’s website to file your tax returns. Instead, you’ll have to keep and submit digital records of your earnings and expenses using MTD-compatible software. This will come into effect in 2026. 

Want to know more about making tax digital? Read all about it here.

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