Finrato

Self-Employed Tax Calculator (Sole Trader)

Estimate 2026/27 Income Tax, Class 4 National Insurance and take-home pay from annual sole-trader profit.

Annual profit

Income Tax

—

Class 4 NI

—

Total deductions

—

Take-home

—

Effective rate

—

Monthly take-home

—

Class 2 is nil and treated as paid if profit is at least £7,105. Estimate only.

How sole-trader tax is estimated

Income Tax uses the personal allowance, including its taper above £100,000, followed by the basic, higher and additional rate bands.

Class 4 National Insurance is charged on profit bands. Class 2 is nil and treated as paid when profit reaches the stated threshold.

2026/27 assumptions

Personal allowance: £12,570, tapered above £100,000
Income Tax: 20%, 40% and 45% bands
Class 4 NI: 6% from £12,570 to £50,270, then 2%

Frequently asked questions

What profit should I enter?

Enter annual business profit after allowable expenses, before Income Tax and National Insurance.

Is Class 2 NI charged?

Class 2 is nil; it is treated as paid when profit is at least £7,105.

Does this include every relief?

No. It is a planning estimate and does not include every deduction, relief or payment on account.

Self-employed tax in 2026/27: what a sole trader actually keeps

As a sole trader you pay two things on your profit: Income Tax and Class 4 National Insurance — both calculated on profit (income minus allowable expenses), both collected through Self Assessment. The calculator above applies the 2026/27 rules: personal allowance of £12,570, income tax at 20% / 40% / 45%, and Class 4 NI at 6% on profits between £12,570 and £50,270 plus 2% above that. Class 2 NI no longer costs anything: if your profit reaches £7,105, it is treated as paid, protecting your State Pension record for free.

Worked example

On a profit of £40,000: taxable income is £27,430 after the personal allowance, giving £5,486 income tax; Class 4 NI adds £1,646. You keep about £32,868 — roughly £2,739 a month, an effective rate of 17.8%. At £60,000 profit the effective rate rises to 23.1% (£11,432 tax + £2,457 NI, keeping £46,111) — the jump comes from the 40% band starting at £50,270 of income.

What sole traders most often get wrong

Payments on account ambush: once your bill exceeds £1,000, HMRC asks for 150% in year one — the year’s bill plus a 50% advance by 31 January, and another 50% by 31 July. Budget for it or the first January hurts.
Expenses reduce both charges. Every legitimate business cost saves you income tax and Class 4 NI — at profits in the 40% band that is 42p per pound spent.
Pension contributions extend your 20% band and are the main lever self-employed people underuse — there is no employer topping it up for you.
The £100,000 taper: above £100k profit you lose £1 of personal allowance per £2, creating a ~62% effective marginal zone to ~£125k (tax + NI). Pension contributions in that zone are exceptionally effective.
Put money aside as you earn: a separate account holding 25–30% of each invoice prevents the classic January crisis.

Frequently asked questions

Sole trader or limited company — which pays less?

At modest profits the gap has narrowed to little; companies add accountancy costs and admin, and dividend tax has tightened. The switch tends to make sense from roughly £40–50k profits, or where you need liability protection or want to retain earnings — run both scenarios with an accountant before deciding.

Do I pay tax on turnover or profit?

Profit. Turnover minus allowable expenses (equipment, travel, home-office share, software, professional fees). Keep records — from the 2026/27 year Making Tax Digital brings quarterly digital updates for incomes over £50,000.

What about VAT?

Separate system: registration becomes compulsory when taxable turnover passes £90,000 in any rolling 12 months. Below that it is optional — sometimes worth it for reclaiming VAT on costs. Use our VAT calculator for the arithmetic.