How much tax does a sole trader pay in the UK?
September 5, 2026
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September 5, 2026
A sole trader in the UK pays income tax at 20%, 40% or 45% on profits above the £12,570 Personal Allowance, plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% above £50,270. On £30,000 profit, that works out to approximately £4,532. On a £50,000 profit, approximately £9,748.
Those are the headline numbers. But how much you actually pay depends on your total profit, what expenses you claim, any other income you have and whether you’re entitled to additional reliefs. Below is a full breakdown with examples at every common profit level.
If you’d rather just get the number for your specific situation, Tax Return Assist’s self-employed accountants can calculate your exact liability and make sure you’re not paying more than you need to.
Two main taxes: income tax and Class 4 National Insurance contributions.
Income tax is charged on your taxable profits. That’s your business income minus your allowable expenses minus your Personal Allowance. The rates for 2025/26 (England, Wales and Northern Ireland):
0% on the first £12,570 (Personal Allowance).
20% on £12,571 to £50,270 (basic rate).
40% on £50,271 to £125,140 (higher rate).
45% above £125,140 (additional rate).
Class 4 NICs are charged on your trading profits:
6% on profits between £12,570 and £50,270.
2% on profits above £50,270.
Compulsory Class 2 NICs were abolished from 6 April 2024. You may still be able to make voluntary Class 2 contributions to protect your State Pension entitlement, but there is no compulsory charge to add to your 2025/26 calculation.
If you’re also employed, your PAYE income uses up part of your Personal Allowance and tax bands first. Your sole trader profits sit on top, which can push you into a higher band. The combined picture determines your total liability.
These examples assume the sole trader has no other income, is entitled to the full Personal Allowance and has no additional reliefs or pension contributions. All figures are for 2025/26.
Taxable: £2,430. Income tax: £486. Class 4 NIC: £145.80.
Total: £631.80. Effective rate: 4.2%.
Taxable: £7,430. Income tax: £1,486. Class 4 NIC: £445.80.
Total: £1,931.80. Effective rate: 9.7%.
Taxable: £12,430. Income tax: £2,486. Class 4 NIC: £745.80.
Total: £3,231.80. Effective rate: 12.9%.
Taxable: £17,430. Income tax: £3,486. Class 4 NIC: £1,045.80.
Total: £4,531.80. Effective rate: 15.1%.
Taxable: £27,430. Income tax: £5,486. Class 4 NIC: £1,645.80.
Total: £7,131.80. Effective rate: 17.8%.
Taxable: £37,430. Income tax: £7,486. Class 4 NIC: £2,245.80.
Total: £9,731.80. Effective rate: 19.5%.
Income tax: £11,432 (basic rate: £7,540 on £37,700 + higher rate: £3,892 on £9,730).
Class 4 NIC: £2,262 at 6% + £194.60 at 2% = £2,456.60.
Total: £13,888.60. Effective rate: 23.1%.
Income tax: £17,432. Class 4 NIC: £2,756.60.
Total: £20,188.60. Effective rate: 26.9%.
Income tax: £27,432. Class 4 NIC: £3,256.60.
Total: £30,688.60. Effective rate: 30.7%.
Above £100,000, the Personal Allowance taper adds an effective extra 20% on income between £100,000 and £125,140, making the effective marginal rate 60% in that band. At £125,000 profit, total tax and NIC is approximately £40,500 (effective rate: 32.4%).
For a step-by-step guide to doing this calculation yourself, see our self assessment tax calculator guide.
You pay tax on profit, not turnover. Every legitimate business expense you claim reduces your taxable profit and therefore your tax bill.
If you turn over £40,000 and have £8,000 in allowable expenses, your taxable profit is £32,000. At that level you’d pay approximately £5,131.80 in income tax and NICs. Without the expenses, you’d pay £7,131.80. Those £8,000 in expenses saved you £2,000 in tax.
Common sole trader expenses: office supplies and stationery, software and app subscriptions, business phone costs (business proportion), business travel and mileage (45p per mile for the first 10,000 miles, 25p after), professional subscriptions and memberships, accounting fees, a proportion of home costs if you work from home, equipment and tools, marketing and advertising and professional training directly related to your current trade.
Our guide to common self assessment mistakes covers the expenses people forget most often and the ones that get you into trouble if you claim them incorrectly.
If your total self-employment income (before expenses) is £1,000 or less, you don’t need to tell HMRC about it. No registration, no tax return, no tax.
If your income is above £1,000, you have a choice: deduct the £1,000 trading allowance instead of your actual expenses, or deduct your actual expenses. You can’t do both.
The trading allowance is useful if your expenses are low. If you earn £5,000 from a side hustle and your actual expenses are only £200, the £1,000 trading allowance gives you a larger deduction. If your actual expenses are £2,500, claiming the real expenses is obviously better.
Your employment income and self-employment profits are added together to determine your total income. Your employer handles the PAYE on your salary. You report the self-employment income through self assessment.
The key impact: your employment income may have already used up your Personal Allowance and some or all of the basic rate band. If your salary is £35,000, you’ve already used £22,430 of the basic rate band. Your sole trader profits then start being taxed at whatever point you’ve reached in the bands.
If your combined income pushes you into the higher rate band, the sole trader profits above the band threshold are taxed at 40% income tax plus 2% Class 4 NIC (42% combined), rather than the 26% you’d pay if it were your only income.
This is one of the situations where an accountant for self-employed individuals adds the most value. Getting the interaction between PAYE and self assessment right can make a meaningful difference to your bill.
If your self assessment liability is £1,000 or more and less than 80% was deducted at source through PAYE, HMRC requires payments on account. These are advance payments towards next year’s tax bill.
Each payment on account is 50% of the previous year’s relevant self assessment liability. So if your 2025/26 bill is £4,532, HMRC wants two payments of £2,266 towards 2026/27, due 31 January 2027 and 31 July 2027.
That means on 31 January 2027, you’d pay your 2025/26 bill (£4,532) plus the first payment on account (£2,266) = £6,798. This catches a lot of first-time filers off guard. Budget for it from the start.
If your income drops significantly, you can apply to reduce payments on account through your HMRC online account. Our self assessment deadline guide covers all the payment dates.
Claim every allowable expense: This is the most direct way to reduce tax. £1 of expenses saves you between 26p (basic rate) and 42p (higher rate) in tax and NIC.
Use pension contributions: Contributions to a personal pension get tax relief at your marginal rate. A £1,000 pension contribution costs a basic-rate taxpayer £740 after relief. For higher-rate taxpayers, the effective cost is £580. Pension contributions also reduce your adjusted net income, which can be valuable if you’re near the £100,000 Personal Allowance taper.
Claim Marriage Allowance: If your spouse or civil partner earns under £12,570 and you’re a basic rate taxpayer, they can transfer £1,260 of their personal allowance to you. Saves up to £252 per year.
Consider incorporating: if your profits are consistently above £50,000 to £60,000, a limited company structure can be more tax-efficient. Our sole trader vs limited company comparison breaks down the numbers at every profit level.
Use capital allowances: If you buy equipment, vehicles, or tools for your business, you can claim capital allowances. The annual investment allowance lets you deduct the full cost of qualifying assets up to £1 million in the year you buy them.
If you have a student loan, you make repayments through self assessment as well as (or instead of) through PAYE.
Plan 1: 9% on income above £24,990.
Plan 2: 9% on income above £27,295.
Plan 4 (Scotland): 9% on income above £31,395.
Plan 5: 9% on income above £25,000.
Postgraduate loan: 6% on income above £21,000.
These repayments are calculated on your total income, not just your sole trader profits.
The figures above are based on standard assumptions. Your actual bill depends on your specific expenses, reliefs, other income and personal circumstances.
Tax Return Assist’s small business accountants calculate your exact liability, identify every legitimate deduction and file your return on time. They work with sole traders across Essex and London. Call 02039377911, email contact@taxreturnassist.co.uk or use the online quote form.
Disclaimer: This article is for general information purposes only and does not constitute professional financial, tax or legal advice. Tax rules and rates can change, and individual circumstances can affect the amount of tax payable. Always check the latest HMRC guidance or speak to a qualified accountant or tax adviser before making tax decisions. Tax Return Assist accepts no liability for actions taken based on the information contained in this article.
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