Tax on self-employed income

Step by step

1. 1Add up business income and take off allowable expenses, or use the trading allowance instead of expenses
2. 220% income tax applies to the next £37,700 of taxable income after the personal allowance
3. 3The personal allowance shrinks once income is over £100,000
4. 440% applies until taxable income reaches £125,140
5. 545% applies to taxable income over £125,140, by which point the personal allowance has gone.
6. 6Class 4 National Insurance is 6% on profits between £12,570 and £50,270, then 2%
7. 7This is the England, Wales and Northern Ireland picture. Scottish income tax bands differ

Common mistakes

• Taxing turnover instead of profit
• Claiming the trading allowance and expenses together
• Forgetting Class 4 on top of income tax

Related guides

• Allowable expenses self-employed
• Payments on account explained
• Self Assessment explained