Key takeaways
- Self-employed tax is worked out on profit, using Income Tax bands and Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above.
- A sole trader in England with £45,000 profit and no other income owes £8,431.80 for 2026/27, about 18.7% of profit or £702.65 a month.
- Each extra £1 of profit costs 26p in the basic rate band and 42p in the higher rate band, which is a better guide than a flat percentage.
- In your first year, save one and a half times your tax bill for January, because HMRC adds a payment on account of half the bill.
- If you are VAT registered, keep the VAT you charge separate: at 20% it is one sixth of the VAT-inclusive amount.
To work out how much tax to put aside as a self-employed person, estimate your profit for the year, work out the Income Tax and Class 4 National Insurance on it, and save that amount as you earn. For 2026/27, a sole trader in England with £45,000 of profit and no other income owes £8,431.80, which is about 18.7% of profit, but the right percentage for you depends on your profit level.
A flat rule such as "save 25%" can be too much at lower profits and too little at higher ones, and it ignores payments on account, which can make your first January bill half as big again. This guide shows the calculation so you can set your own figure.
Step 1: work out your profit, not your income
Tax is charged on profit: your self-employed income minus allowable business expenses. Your first £1,000 of self-employment income may be tax-free under the trading allowance (GOV.UK). Put aside tax on profit, and keep a buffer if your income varies from month to month.
Step 2: Income Tax rates for 2026/27
The 2026/27 tax year runs from 6 April 2026 to 5 April 2027. These are the rates in England, Wales and Northern Ireland for someone with the standard Personal Allowance:
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Your Personal Allowance goes down by £1 for every £2 of adjusted net income above £100,000, so it is zero at £125,140 and above (GOV.UK). Scotland has its own bands, with rates from 19% to 48%, so check the Scottish Income Tax rates if you live there.
Step 3: Class 4 National Insurance for 2026/27
| Profits | Class 4 rate |
|---|---|
| Up to £12,570 | 0% |
| £12,570 to £50,270 | 6% |
| Over £50,270 | 2% |
If your profits are £7,105 or more, Class 2 contributions are treated as paid, so you do not pay them. Below £7,105 you can choose to pay voluntary Class 2 at £3.65 a week to protect your National Insurance record (GOV.UK).
Worked example: £45,000 of profit
| Step | Calculation | Amount |
|---|---|---|
| Taxable profit | £45,000 less £12,570 Personal Allowance | £32,430.00 |
| Income Tax | £32,430 at 20% | £6,486.00 |
| Class 4 National Insurance | £32,430 at 6% | £1,945.80 |
| Total for 2026/27 | £6,486.00 plus £1,945.80 | £8,431.80 |
| Share of profit | £8,431.80 divided by £45,000 | 18.7% |
| Monthly amount to set aside | £8,431.80 divided by 12 | £702.65 |
How much to put aside at different profit levels
The same calculation at other profit levels, for a sole trader in England with no other income, using 2026/27 rates:
| Profit | Income Tax | Class 4 NI | Total | Share of profit |
|---|---|---|---|---|
| £20,000 | £1,486.00 | £445.80 | £1,931.80 | 9.7% |
| £30,000 | £3,486.00 | £1,045.80 | £4,531.80 | 15.1% |
| £45,000 | £6,486.00 | £1,945.80 | £8,431.80 | 18.7% |
| £60,000 | £11,432.00 | £2,456.60 | £13,888.60 | 23.1% |
| £80,000 | £19,432.00 | £2,856.60 | £22,288.60 | 27.9% |
| £100,000 | £27,432.00 | £3,256.60 | £30,688.60 | 30.7% |
The share rises with profit because each extra pound is taxed at a higher combined rate. Between £12,570 and £50,270, each extra £1 of profit costs 26p (20% Income Tax plus 6% Class 4). Between £50,270 and £100,000, it costs 42p (40% plus 2%). Between £100,000 and £125,140, you also lose 50p of Personal Allowance for each extra £1, which adds another 20p of tax at 40%, so each extra £1 costs 62p.
A rule of thumb, and where it comes from
If you want one number to work with, use the marginal rates above rather than a flat percentage:
- Profit mostly under £50,270: set aside about 26% of everything you earn above £12,570. At £45,000, 26% of £32,430 is £8,431.80, exactly the bill.
- Profit between £50,270 and £100,000: take £9,802, the tax on the first £50,270, and add 42% of profit above £50,270. At £60,000 that is £9,802 plus 42% of £9,730 (£4,086.60), which is £13,888.60, the same as the full calculation.
- Other income: if you also have a salary, pension, dividends or rental profit, your self-employed profit is taxed on top of it, so more of it falls in the higher bands. Work it out on your total income.
For an estimate on your own numbers, use our self-employed tax calculator.
Do not forget payments on account
Once your Self Assessment bill is £1,000 or more, and less than 80% of your tax is collected at source, HMRC asks for two payments on account towards the next year, each half of the previous year's bill, due on 31 January and 31 July (GOV.UK).
This matters most in your first year. With a 2025/26 bill of £8,431.80, the payment due on 31 January 2027 is £12,647.70: the £8,431.80 bill plus a £4,215.90 first payment on account for 2026/27. Another £4,215.90 is due on 31 July 2027. If you are saving for your first bill, aim for one and a half times the tax on your profit by January. After that, the payments on account mean you are paying roughly as you go. Our guide to payments on account has more detail.
If you are VAT registered
VAT is separate from your Income Tax pot. You must register if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days (GOV.UK). Once registered, the VAT you charge is money you collect for HMRC.
At the standard rate of 20%, VAT is one sixth of a VAT-inclusive price: on a £1,200 invoice, £200 is VAT. Move that into a separate account when you are paid, less the VAT you can reclaim on your costs. VAT returns and payments are usually due one calendar month and 7 days after the end of each VAT period (GOV.UK), so this money leaves much sooner than your Self Assessment bill.
Practical ways to set money aside
- Open a separate savings account for tax and move a fixed percentage of every payment into it on the day it arrives.
- Recalculate once or twice a year, or when your profit changes, rather than sticking with last year's percentage.
- Pay HMRC as you go if you prefer. A Budget Payment Plan lets you make weekly or monthly Direct Debit payments towards your next bill, as long as you are up to date with the last one.
- Keep the Self Assessment deadlines in view: the 2025/26 return and tax are due by 31 January 2027. See when the next Self Assessment deadline is.
How GoForma can help
GoForma's ACCA and AAT qualified accountants have filed more than 7,000 tax returns and can work out what you should be setting aside. Sole trader packages from £22 a month include your Self Assessment return, or a one-off Self Assessment tax return is £198 plus VAT with HMRC enquiry support included. We are rated 4.9 on Google from 72 reviews. Book a free consultation.
