If you are self-employed in the UK, you pay income tax on your profits (turnover minus allowable expenses) and Class 4 National Insurance. The rates are the same as for employed people, but the way you pay is different — through Self Assessment rather than PAYE.
For 2025/26, you pay 20% income tax on profits between £12,570 and £50,270, 40% on profits between £50,270 and £125,140, and 45% on profits above £125,140. Class 4 NI is 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
Common allowable expenses include office costs such as stationery, phone bills and internet, travel costs including fuel, parking and public transport, business insurance, professional subscriptions, stock and materials, accountancy fees, and a proportion of your home costs if you work from home.
On a profit of £40,000, your tax bill would be approximately £5,486 in income tax and £1,646 in Class 4 NI, totalling £7,132. This leaves you with £32,868 or £2,739 per month.
Payment on account is important to understand. In your second year of self-employment, HMRC requires you to make payments on account — two advance payments towards next year's tax bill, each equal to 50% of the previous year's liability. This means your second January payment can be up to 150% of one year's tax.
The Self Assessment deadline for online returns is 31 January following the end of the tax year. For the 2025/26 tax year, this means 31 January 2027. Late filing attracts an automatic £100 penalty.
Use our self-employed tax calculator to calculate your exact tax bill for any level of profit.