What taxes do self employed have to pay?
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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