What taxes do self-employed have to pay?

  • 2 min read
  • Last updated 28 Mar 2024

Wondering what taxes self-employed people have to pay? Just like employees, self-employed people have to pay income tax and National Insurance contributions.

The only difference is that they’re not collected automatically through PAYE. Basically, instead of an employer doing it for you, you have to calculate them yourself then file a Self Assessment tax return.

What’s the personal allowance for the self-employed?

First of all, (just in case you’re not quite sure) a personal allowance is the amount of money you can earn without having to pay Income Tax. This is £12,570 for the 2023/2024 tax year (for both employees and self-employed.)

If you have two jobs, one as an employee and one self-employed, make sure that your personal allowance is applied to the one where you make the most money.

On your tax code:

  • Your main employment has the tax code ending in L
  • Your secondary job will have the tax code D0, D1, or BR

How to calculate your income tax rate

This is where it gets a little tricky, so listen up! 🔊

Self-employed people pay Income Tax on profits only. This is different to employees who pay Income Tax on total income.

To calculate your profit, deduct your claimable expenses from your self-employed income (if you have any).Then simply multiply by the tax rate:

Income Tax rate
between £0 and £12,570 0%
between £12,571 and £50,270 20%
between £50,271 to £150,000 40%
above £150,001 45%

If maths isn’t particularly your strongest point, there are plenty of self-employed tax calculators that’ll help you calculate how much tax you owe.

National Insurance Contributions (NIC) for self-employed

If you’re self-employed and your profits are above £12,570, you have to pay class 4 National Insurance contributions.

If you’re self-employed but do not generate enough profit to make compulsory National Insurance contributions, you can make voluntary contributions. 

You may be wondering ‘why would anyone volunteer to pay tax.’ 😅

But in fact, making voluntary contributions will contribute to your state pension entitlement. If you want to check how much you’re currently entitled to, you can do this here

🚨From 6 April 2024 (the 24/25 tax year onwards), Class 2 National Insurance is being scrapped. If you’re under the threshold and pay them voluntarily to qualify for benefits, you’ll still be able to do so.

At the same time, Class 4 is reducing from 9% to 6%.

If you choose to pay your tax bill through Self Assessment, the deadline for filing online is 31st January. There are also other ways to pay NIC:

  • Postal cheque
  • Approve a payment through your online bank account
  • At your bank/building society
  • Via direct debit

If you want to know more how to pay National Insurance contributions if you’re self-employed, check out our detailed guide here.

The self-employed brain

I’m self-employed and need help with my taxes! 😫

Whether you need a hand sorting your Self Assessment tax return or simply need tax advice, our accredited accountants are more than happy to help! 

Learn more about our tax services here.

🚀 Boss your bookkeeping – for free

Manage your self-employed finances in one place with 10/10 bookkeeping tools.

  • Save money, time and effort
  • Create and personalise invoices
  • Track all your income and expenses in one place
  • And more!