How much tax will I pay as a sole trader in 2026/27?

This is the question every sole trader asks in the van or at the kitchen table. The answer depends on your profit (income minus allowable expenses), not your turnover. Turnover of £80,000 with £30,000 of costs means £50,000 profit — tax is calculated on the £50,000.

2026/27 tax rates (England, Wales, Northern Ireland)

Income tax

• Personal allowance: £0 tax on first £12,570
• Basic rate: 20% on £12,571 – £50,270
• Higher rate: 40% on £50,271 – £125,140
• Additional rate: 45% above £125,140

National Insurance Class 4

• Nothing on first £12,570
• 6% on £12,571 – £50,270
• 2% above £50,270

Class 2: £3.45 per week (£179.40 per year) if profits above £12,570 (check HMRC for any reforms in your tax year).

Worked examples (approximate)

• £25,000 profit: income tax ~£2,486 + Class 4 NI ~£746 + Class 2 ~£179 ≈ £3,411
• £40,000 profit: ~£5,486 + ~£1,646 + ~£179 ≈ £7,311
• £55,000 profit: ~£8,486 + ~£2,346 + higher-rate NI + Class 2 ≈ £11,106
• £75,000 profit: ~£16,486 + ~£2,646 + Class 2 ≈ £19,311

Scotland uses different income tax bands — use HMRC's calculator if you are based there.

How to reduce your tax bill legally

• Claim all allowable expenses — materials, tools, van, fuel, phone, insurance, PPE, training
• Claim mileage at HMRC rates — see our mileage tracking guide
• Use your personal allowance fully
• Make pension contributions (reduces taxable profit)
• Working from home allowance if applicable

For category-by-category expenses, read the sole trader expenses UK guide.

Payment on account

After your first Self Assessment year, HMRC often asks for payments on account — advance payments towards nextyear's bill:

• Due 31 January and 31 July
• Each payment is typically 50% of the previous year's tax bill
• January can feel brutal: balance for this year plus first payment on account for next year — roughly 150% of what you expected

Billdr's dashboard tax estimate helps you set money aside throughout the year so January is not a surprise.

How Billdr helps

• Real-time tax estimate on your dashboard
• Updates as you log paid invoices and expenses
• Shows income tax, Class 4 NI, Class 2, and total
• Accountant pack includes the tax estimate
• “Explain my tax position” AI breaks it down in plain English

Try Billdr free for 30 days — no card required. Use code 3MONTHSFREE for 3 months free when you continue. Start at www.billdr.co.uk.