Sole Trader Tax Calculator
Income tax and Class 4 National Insurance on your self-employed profit — with personal allowance, pension contributions, and student loan deductions. See the band breakdown and your effective tax rate.
Revenue minus allowable business expenses
Employment income, rental income, or other sources
Gross personal pension — reduces your income tax
2026/27 rates. Class 2 NI abolished April 2024; Class 4 NI 6%/2%. Personal allowance £12,570.
Where the income goes
Tax breakdown
| Line | Amount | Notes |
|---|---|---|
| Income tax | £6,486.00 | |
| Class 4 National Insurance | £1,945.80 | |
| Total deductions | £8,431.80 | 18.7% effective rate |
| Net income | £36,568.20 |
Income tax bands
| Band | Amount in band | Tax |
|---|---|---|
| Basic rate | £32,430.00 | £6,486.00 |
How it works
Taxable profit is revenue minus allowable business expenses. Income tax applies to the profit (plus any other income) after the personal allowance, using the same bands as employment. Class 4 NI applies to trading profit only — other income is not subject to Class 4.
A pension contribution reduces the income subject to income tax but does not affect Class 4 NI. If you have employment income as well, the calculator adds both income streams together before applying the personal allowance and bands.
Frequently asked questions
What taxes does a sole trader pay?
A sole trader pays income tax on taxable profit (revenue minus allowable expenses) and Class 4 National Insurance on trading profits. Income tax uses the same personal allowance (£12,570 in 2026/27) and bands as employment income — 20% basic rate, 40% higher rate, 45% additional rate. Class 2 NI was abolished from April 2024. Class 4 NI for 2026/27 is 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. On £45,000 of profit: income tax £6,486, Class 4 NI £1,946, net £36,568.
When do I pay my self-assessment tax bill?
Self-employed individuals must file a Self Assessment tax return by 31 January following the end of the tax year. The main payment is also due on 31 January, with a second payment on account due on 31 July. In your first year you may owe a lump sum covering the balance plus the first payment on account — plan cash flow accordingly.
Can I claim a pension to reduce my tax bill?
Yes. Personal pension contributions (not via an employer) attract income tax relief at source — a £800 contribution becomes £1,000 in your pension (basic rate relief added automatically). If you are a higher-rate taxpayer, you claim the additional 20% via self-assessment. The pension contribution is deducted from your income before calculating income tax, reducing both the tax and potentially keeping you in a lower band. It has no effect on Class 4 NI.
Is being self-employed tax-efficient compared to employment?
The headline difference for sole traders is that Class 4 NI (6%/2%) is lower than employee Class 1 NI (8%/2%), so at the same income level a self-employed person pays slightly less NI. However, self-employment carries no employer NI contribution, no statutory sick pay, no employer pension, and typically higher professional costs. For higher earners, a limited company (paying corporation tax + dividends) is often more tax-efficient — see the Ltd Company vs PAYE calculator.