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What taxes do self employed have to pay?

We've updated this guide on 27th May 2020

The self-employed taxes are the same as the ones regular employees have to pay: income tax and National Insurance contributions.

You’re just paying them differently: instead of the employer doing it for you, you have to calculate them, file a Self Assessment tax return, and pay the taxes yourself.

The Personal Allowance for self-employed

Is the same as for regular employees: £12,500 in the 2020/21 tax year.

If you have two jobs and one is self-employed, make sure that your Personal Allowance is applied to the one where you make the most money.

Just look at your tax code:

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

How to calculate your income tax rate

Unlike for employees, when you’re self-employed you pay income tax on your profits only, not your total income.

To calculate your profits deduct your claimable expenses from your self-employed income.

Then simply multiply by the tax rate:

Income Tax rate
between £0 and £12,500 0%
between £12,501 and £50,000 20%
between £50,001 to £150,000 40%
above £150,001 45%

Here is a self-employed tax calculator if you want to know how much you have to pay.

National Insurance Contributions (NIC) for self-employed

As a self-employed, you need to pay:

  • Class 2 NIC
  • and maybe Class 4 NIC: depending on your profit.

Check out our article about the NIC that sole traders have to pay.

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