Sole trader tax calculator 2026/27
What you owe HMRC this year, what to put away from each invoice, and the two dates in 2028 when it is due. Income Tax, Class 4, student loan, VAT line.
Last updated 15 October 2026
How a sole trader's tax is worked out
Three things come out of your profit, in this order. Profit means sales minus allowable expenses (or minus the £1,000 trading allowance if that is more), on the cash basis, which is the default for sole traders since April 2024.
- Income Tax. The first £12,570 of your total income (salary plus profit) is tax-free. Then 20% up to £50,270, 40% up to £125,140, 45% above. Over £100,000 the allowance shrinks by £1 for every £2 of income, which makes the real rate between £100,000 and £125,140 about 60%. Scotland uses six bands instead; switch the toggle.
- Class 4 National Insurance. 6% of profit between £12,570 and £50,270, then 2% of everything above. Only on self-employed profit, not on salary (salary has its own NI through PAYE).
- Class 2 National Insurance. Since April 2024 you no longer pay it if your profit is above the small profits threshold (£7,105 in 2026/27); you get the National Insurance credit anyway. Below that you can pay £3.65 a week voluntarily to protect your State Pension record, about £190 a year, and it is usually worth it.
A student loan is repaid through Self Assessment too: 9% (6% for a postgraduate loan) of total income above your plan's threshold, minus whatever your employer already took if you also have a job.
Payments on account: the January surprise
Once your bill is over £1,000, HMRC assumes next year will look the same and asks for it in advance: half on 31 January, half on 31 July. In your first year nothing has been paid ahead, so on 31 January 2028 you pay the whole of 2026/27 plus 50% of it again for 2027/28. A £9,000 bill becomes £13,500 that day. This is the single most common cash crisis among first-year freelancers, and the only fix is to know the number in April, not in January.
If profit falls, you can ask HMRC to reduce the payments on account (form SA303 or in your online account). If you reduce them too far, interest is charged on the shortfall.
The dates for the 2026/27 tax year
| Date | What |
|---|---|
| 5 April 2027 | Tax year ends |
| 5 October 2027 | Register for Self Assessment if this is your first year |
| 31 October 2027 | Paper return deadline (online is the norm) |
| 31 January 2028 | Online return, balancing payment for 2026/27, first payment on account for 2027/28 |
| 31 July 2028 | Second payment on account for 2027/28 |
VAT and Making Tax Digital
VAT registration is compulsory once VAT-taxable turnover over any rolling 12 months passes £90,000, or you expect to pass it in the next 30 days. Below that it is optional; it makes sense when your clients are VAT-registered and you want to reclaim VAT on your costs, and it makes no sense when your clients are consumers who would see a 20% price rise. Deregistration is possible below £88,000.
Making Tax Digital for Income Tax starts on 6 April 2026 for anyone with qualifying income (self-employment plus property) over £50,000 in 2024/25: digital records and a quarterly update to HMRC through software, then a final declaration instead of the old return. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028, so most full-time freelancers are in by then.
Where the figures come from
- Income Tax bands and personal allowance: GOV.UK, Income Tax rates and Personal Allowances; frozen at 2025/26 levels, confirmed in the House of Commons Library briefing on 2026/27 rates.
- Scottish bands: mygov.scot, rates for 6 April 2026 to 5 April 2027.
- Class 2 and Class 4 NI: GOV.UK, self-employed National Insurance rates.
- Student loan thresholds 2026/27: GOV.UK, repaying your student loan.
- VAT threshold: GOV.UK, when to register for VAT. MTD: GOV.UK, Making Tax Digital for Income Tax.
Questions people ask
How much tax does a sole trader pay in the UK in 2026/27?
Income Tax on profit above the £12,570 personal allowance (20% to £50,270, 40% to £125,140, 45% above; Scotland has its own six bands from 19% to 48%), plus Class 4 National Insurance at 6% on profit between £12,570 and £50,270 and 2% above that. On £45,000 of profit in England that is £6,486 Income Tax and £1,946 Class 4, about £8,430 or 19% of profit. Class 2 is treated as paid once profit passes £7,105, so nothing is due.
What percentage of each invoice should I set aside for tax?
Roughly 20% of profit at £30,000, 25% at £50,000 and 30% to 35% above £60,000 once the 40% band and the 2% Class 4 rate apply. Add 9% of income over your plan threshold if you repay a student loan. The calculator gives the exact share for your numbers; most freelancers move it to a separate account the day each invoice is paid.
What are payments on account and when are they due?
If your Self Assessment bill is over £1,000 and less than 80% of your tax was collected through PAYE, HMRC asks you to pay next year's tax in advance: two payments of 50% of this year's bill, on 31 January and 31 July. In your first year this means the 31 January 2028 payment for 2026/27 is 150% of the bill: the balance for the year plus the first payment on account for 2027/28.
Do I need to register for VAT as a freelancer?
Only when your VAT-taxable turnover over any rolling 12 months passes £90,000, or you expect it to within the next 30 days. You can register voluntarily below that, which makes sense if your clients are VAT-registered businesses and you want to reclaim VAT on costs. Deregistration is possible below £88,000.
What is Making Tax Digital for Income Tax and does it affect me?
From 6 April 2026, sole traders and landlords with qualifying income over £50,000 (in 2024/25) keep digital records and send HMRC quarterly updates through software instead of one annual return. The threshold drops to £30,000 from April 2027 and £20,000 from April 2028. Self Assessment itself continues; what changes is the frequency and the software requirement.
What is the trading allowance?
£1,000 of trading income a year you can earn tax-free without registering. Above that you can either deduct your actual expenses or deduct the flat £1,000 allowance instead, whichever is higher. The calculator picks the better one for you. If your total self-employed income is under £1,000 you do not need to file at all.
Is this calculator right for Scotland?
Yes, switch the toggle. Scottish taxpayers pay Income Tax on six bands (19%, 20%, 21%, 42%, 45%, 48%) with the 2026/27 thresholds set by the Scottish Parliament, but National Insurance, the personal allowance and the VAT threshold are UK-wide and stay the same.
Keep going
How much to set aside for taxes EU VAT reverse charge checker Hourly rate calculator Late fee calculator (UK statutory interest) Free invoice generator Payment fee calculator How to invoice as a freelancerThe January number, known in April
Go Lancer tracks what came in, shows the next three months, and keeps every invoice ready for Self Assessment. Built with 100+ freelancers.