How do you calculate your self assessment tax bill?
August 30, 2026
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August 30, 2026
You calculate your self assessment tax bill by adding up your taxable income, deducting your personal allowance and allowable expenses or other applicable reliefs, and then applying the relevant tax rates to each band.
For 2025/26, the standard income tax rates for taxpayers in England, Wales, and Northern Ireland are 0% on income up to £12,570 (where the Personal Allowance is available), 20% on £12,571 to £50,270, 40% on £50,271 to £125,140, and 45% above £125,140. Self-employed people may also pay Class 4 National Insurance contributions on their profits. Compulsory Class 2 NICs were abolished from 6 April 2024, although voluntary Class 2 contributions may still be possible in certain circumstances.
HMRC’s online self assessment system calculates your tax liability automatically when you file your return. But knowing approximately how much you may owe before filing can help you budget, plan your payments, and avoid an unexpected January bill.
Below is a step-by-step guide to estimating your self assessment bill manually, with worked examples. If you’d rather have a professional crunch the numbers, Tax Return Assist’s personal tax accountants can give you an accurate estimate before you even file.
Start with the income you received between 6 April 2025 and 5 April 2026.
Self-employment profit: For a sole trader, your taxable trading profit is generally your business income minus allowable business expenses. For example, if you had turnover of £45,000 and allowable expenses of £8,000: £45,000 – £8,000 = £37,000 trading profit. You pay income tax on your taxable profit rather than your total turnover.
Employment income: Include your gross employment income, such as salary, bonuses, and taxable benefits in kind where applicable. Your P60 provides your annual salary and tax information, although other documents may be needed for benefits or additional employment income.
Rental income: Rental income is calculated using the relevant property income rules. For many landlords, this means rental income less allowable property expenses. For residential property, finance costs such as mortgage interest are generally subject to a basic-rate tax reduction rather than being deducted directly from rental income. The property tax accountant page explains which expenses qualify.
Dividends: Include dividends received from shares in UK or overseas companies. Dividends have their own tax rates and allowance, so they are calculated separately from ordinary income.
Savings interest: Include taxable interest received from banks, building societies and other savings. The amount of tax-free savings interest available depends on your tax band and whether the Personal Savings Allowance applies.
Other income: You may also need to report other taxable income, such as pensions, foreign income, trust income, and certain other sources. Capital gains are calculated separately from income tax.
The standard Personal Allowance for 2025/26 is £12,570. Where you are entitled to the full personal allowance, the first £12,570 of taxable income is normally tax-free.
Personal allowance taper: If your adjusted net income is above £100,000, your personal allowance is reduced by £1 for every £2 of adjusted net income above £100,000. The allowance is fully withdrawn once adjusted net income reaches £125,140. This means income between £100,000 and £125,140 can result in an effective marginal income tax rate of 60% for taxpayers entitled to the standard Personal Allowance.
Other reliefs and deductions may also affect your tax calculation. These can include qualifying pension contributions, Gift Aid donations, certain trading losses, and Marriage Allowance where eligible.
The £1,000 trading allowance may be useful where your trading income is low and you are eligible to use it. You generally cannot claim the trading allowance and actual allowable expenses against the same income.
Your taxable income is then used to determine how much falls into each tax band.
For 2025/26, the main income tax rates for England, Wales, and Northern Ireland are:
Personal Allowance (0%): the first £12,570 is normally tax-free if you are entitled to the full personal allowance.
Basic rate (20%): taxable income from £12,571 to £50,270.
Higher rate (40%): taxable income from £50,271 to £125,140.
Additional rate (45%): taxable income above £125,140.
These thresholds can interact with different types of income. Generally, non-savings income is considered first, followed by savings income and then dividend income. This matters because savings and dividends can have different allowances and tax rates.
Scottish taxpayers: If you live in Scotland, Scottish income tax rates and bands apply to most non-savings and non-dividend income. You can verify the latest thresholds on the GOV.UK Scottish Income Tax page when calculating your liability.
Self-employed people may have to pay Class 4 NICs on their trading profits.
Compulsory Class 2 NICs were abolished from 6 April 2024, so you should not automatically add a Class 2 charge to a 2025/26 self assessment calculation. People with low profits may be able to make voluntary Class 2 contributions in certain circumstances to protect their state pension entitlement.
6% on profits between £12,570 and £50,270.
2% on profits above £50,270.
For example, if your self-employed profit is £40,000:
£40,000 – £12,570 = £27,430
Class 4 NIC: £27,430 × 6% = £1,645.80
If your profit is £60,000:
£50,270 – £12,570 = £37,700 × 6% = £2,262
£60,000 – £50,270 = £9,730 × 2% = £194.60
Total Class 4 NIC = £2,456.60
Dividends are taxed differently from salary, trading profits, and other non-dividend income.
For 2025/26, the dividend allowance is £500. The dividend tax rates are:
8.75% for dividends falling within the basic-rate band.
33.75% for dividends falling within the higher-rate band.
39.35% for dividends falling within the additional-rate band.
The dividend allowance is not an additional £500 on top of your tax bands. Instead, it means the first £500 of dividend income is taxed at 0%, although it still uses up the relevant tax band.
Example. Suppose you receive a salary of £40,000 and dividends of £15,000. Assuming the salary is your only other income and you are entitled to the full personal allowance:
Salary taxable after personal allowance: £40,000 – £12,570 = £27,430.
Remaining basic-rate band: £50,270 – £40,000 = £10,270.
The first £500 of dividends falls within the dividend allowance (0%).
The next £9,770 falls within the remaining basic-rate band: £9,770 × 8.75% = £854.88.
The remaining £4,730 is taxed at the higher dividend rate: £4,730 × 33.75% = £1,596.38.
Total dividend tax: £854.88 + £1,596.38 = £2,451.26.
This assumes there are no other sources of income, reliefs, or adjustments affecting the calculation.
Capital gains tax is calculated separately from income tax. For 2025/26, the annual exempt amount is £3,000.
For most chargeable gains, the CGT rates are:
18% where the gain falls within the unused basic-rate band.
24% where the gain falls within the higher-rate band.
Different rules can apply to specific assets and circumstances. For example, if you sell a second home or buy-to-let property, you may have to report and pay CGT within 60 days of completion if a CGT payment is due. The gain must also normally be included on your self assessment return where required.
Allowable costs can include certain costs of acquisition and disposal: purchase price, stamp duty, land tax where applicable, solicitors’ fees, estate agent fees, and qualifying improvement costs. Normal repairs and maintenance are generally not allowable costs for calculating a capital gain.
Assume the sole trader has no other income and is entitled to the full Personal Allowance.
Personal Allowance: £12,570.
Taxable income: £30,000 – £12,570 = £17,430.
Income tax: £17,430 × 20% = £3,486.
Class 4 NIC: £17,430 × 6% = £1,045.80.
There is no compulsory Class 2 NIC charge.
Total income tax and Class 4 NIC: £4,531.80.
This is before considering any other relief, payments already made, or other adjustments.
Assume the freelancer has no other income and is entitled to the full Personal Allowance.
Personal Allowance: £12,570.
Taxable income: £55,000 – £12,570 = £42,430.
Income tax: £37,700 × 20% = £7,540.
Remaining: £42,430 – £37,700 = £4,730 × 40% = £1,892.
Total income tax: £9,432.
Class 4 NIC: £37,700 × 6% = £2,262. Plus £4,730 × 2% = £94.60.
Total Class 4 NIC: £2,356.60.
There is no compulsory Class 2 NIC charge for 2025/26.
Total income tax and Class 4 NIC: £11,788.60.
Assume full personal allowance is available, no pension contributions or other reliefs, no other income, and PAYE has been deducted correctly from the salary.
Total income: £65,000. Personal Allowance: £12,570.
The salary uses £45,000 of the available income tax bands.
Tax on salary: £45,000 – £12,570 = £32,430 taxable. £32,430 × 20% = £6,486.
Remaining basic-rate band: £50,270 – £45,000 = £5,270.
Tax on first £5,270 of rental income: £5,270 × 20% = £1,054.
Remaining rental income: £20,000 – £5,270 = £14,730 × 40% = £5,892.
Total income tax: £6,486 + £1,054 + £5,892 = £13,432.
If PAYE of approximately £6,486 has already been deducted from the salary:
Additional self assessment income tax: £13,432 – £6,486 = £6,946.
Rental income does not normally attract Class 4 NICs, because it is property income rather than self-employed trading profit.
If your self assessment liability meets HMRC’s conditions for payments on account, you may have to make advance payments towards your next year’s tax.
Generally, payments on account are required where your tax bill is £1,000 or more, unless more than 80% of the relevant tax was collected outside self assessment, such as through PAYE. Each payment on account is normally 50% of the previous year’s relevant self assessment liability.
For example, if the relevant liability is £10,000:
31 January: £5,000 payment on account.
31 July: £5,000 payment on account.
The January payment can be much larger than expected because it can include the balancing payment for the previous tax year and the first payment on account for the following tax year. For example, if your balancing self assessment liability is £10,000 and your payments on account are £5,000 each, the amount due on 31 January could be £15,000. A further £5,000 would normally be due on 31 July.
Your actual self assessment statement may also include other amounts, such as outstanding liabilities or adjustments. Our guide to self assessment deadlines covers all the key dates.
Claim every legitimate allowable expense: If you are self-employed or have property income, make sure you claim all expenses that are genuinely allowable under the relevant tax rules. Don’t claim personal expenses as business expenses simply to reduce your tax bill. Our guide to common self assessment mistakes covers the expenses people forget most often.
Consider pension contributions: Qualifying pension contributions can provide tax relief. For example, where a pension provider operates relief at source, a £10,000 gross pension contribution generally involves the taxpayer paying £8,000, with £2,000 basic-rate tax relief added by the pension provider. Higher-rate taxpayers may be able to obtain additional tax relief, subject to the relevant rules and limits.
Check Marriage Allowance: If one spouse or civil partner has income below the personal allowance and the other is a basic-rate taxpayer, they may be eligible for marriage allowance. For 2025/26, the transferable amount is £1,260, potentially reducing the recipient’s tax by £252. Eligible couples can generally claim for previous years, subject to the relevant conditions and deadlines.
Consider the trading allowance: The £1,000 trading allowance may be useful for eligible individuals with low trading income. You need to compare the allowance with your actual allowable expenses because you generally cannot claim both the £1,000 trading allowance and actual expenses against the same trading income.
Plan income and expenses carefully: If you are close to a tax-band threshold, legitimate tax planning can sometimes reduce or defer your tax liability. For example, pension contributions or Gift Aid can affect adjusted net income and the amount of personal allowance or tax bands available. Any planning should be based on the relevant tax rules rather than simply delaying income or bringing expenses forward without a genuine commercial reason.
A good accountant will spot opportunities you’d miss. Tax Return Assist’s self-employed accountants and small business accountants review every return for legitimate tax-saving opportunities before filing.
Yes. HMRC’s self assessment system calculates your tax liability when you complete your return. Online calculators can also provide estimates, but they may not account for every situation.
Your calculation can become more complicated if you have multiple sources of income, dividends, rental income, pension contributions, foreign income, capital gains, student loan repayments, high income with a reduced personal allowance, tax already deducted through PAYE, or payments on account.
Accounting software can also provide tax estimates where your records are maintained accurately. A calculator is useful for budgeting, but your final self assessment liability is determined by your actual income, reliefs, tax already paid, and HMRC’s calculation.
The examples above provide an indication of how self assessment tax is calculated, but your actual liability depends on your individual circumstances.
If you have several sources of income, dividends, rental income, foreign income, capital gains, or other tax considerations, a professional tax adviser can help calculate the liability and identify legitimate tax reliefs. Contact Tax Return Assist at 02039377911 or email contact@taxreturnassist.co.uk, or use the online enquiry form.
Disclaimer
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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