If you are self-employed — whether full-time or running a side hustle alongside a PAYE job — you are responsible for calculating and paying your own income tax and National Insurance. This guide covers everything you need to know for the 2026/27 tax year.
When do I need to register?
You must register with HMRC as self-employed if your self-employed income exceeds the £1,000 Trading Allowance in a tax year. You need to register by 5 October following the end of the tax year you started trading. For example, if you started in April 2026, register by 5 October 2027.
Registration is done online through HMRC's website. Once registered, you will file a Self-Assessment tax return each year.
The £1,000 Trading Allowance
If your total self-employed income is under £1,000 per year, you do not need to register or report it. This is the Trading Allowance — a tax-free amount that applies automatically. If your income exceeds £1,000, you can either claim the £1,000 allowance (instead of deducting actual expenses) or deduct your real business expenses — whichever gives the better result.
How self-employed income tax works
Self-employed income tax is calculated in the same way as employed income tax. Your taxable profit (income minus allowable expenses) is added to any other income you have, and the total is taxed using the standard bands:
- Personal Allowance: £12,570 (0%)
- Basic Rate: £12,571–£50,270 (20%)
- Higher Rate: £50,271–£125,140 (40%)
- Additional Rate: over £125,140 (45%)
If you also have employed income (a day job), your self-employed profits are added on top. This means if your salary already uses up your Personal Allowance and Basic Rate band, your self-employed profits may be taxed entirely at 40%.
National Insurance for the self-employed
Self-employed people pay two classes of NI:
- Class 2 — a flat-rate contribution (£3.45/week for 2026/27) that gives you access to the State Pension and certain benefits. You only pay this if your profits exceed the Small Profits Threshold (£6,725).
- Class 4 — calculated as a percentage of your profits: 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
Class 4 NI is lower than the 8% employee rate for PAYE workers. This is one area where self-employment has a small advantage — though you lose the employer NI that funds some benefits.
Allowable expenses
You can deduct legitimate business expenses from your income before calculating tax. Common allowable expenses include:
- Office costs (stationery, phone bills, software subscriptions)
- Travel (business miles at 45p/mile for the first 10,000, 25p thereafter)
- Working from home (simplified expenses: £6/week or actual costs)
- Professional services (accountant fees, insurance)
- Marketing and advertising
- Training directly related to your current trade
- Equipment and tools (capital allowances for larger items)
You cannot claim for clothing (unless specialist, like a uniform), food (unless overnight for work), fines, or personal expenses mixed with business use (unless you apportion correctly).
Payments on account
If your Self-Assessment tax bill is over £1,000, HMRC will ask you to make "payments on account" — advance payments towards next year's bill. Each payment is 50% of the previous year's bill, due on 31 January and 31 July.
This can be a shock in your first profitable year: you pay the current year's tax bill plus 50% of it again as a payment on account, all on the same 31 January deadline. Budget for this by setting aside 25-30% of your profits throughout the year.
Key deadlines
| Deadline | What |
|---|---|
| 5 October | Register as self-employed (if new) |
| 31 October | Paper tax return deadline |
| 31 January | Online tax return deadline + pay tax owed + first payment on account |
| 31 July | Second payment on account |
Estimate your self-employed tax
Use the income tax calculator to estimate your total tax bill. Enter your net profit (income minus expenses) as your gross income. Note that the calculator uses employee NI rates by default — for a precise self-employed NI calculation, the income tax figure will be accurate but adjust the NI mentally (6% Class 4 vs 8% employee rate for the main band).