How much tax to set aside when you're self-employed

What goes into the bill

• Income tax on your profit (income minus allowable expenses). The first £12,570 is usually covered by your Personal Allowance, then 20% up to £50,270, 40% above that and 45% above £125,140.
• Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above £50,270.
• Class 2 National Insurance is treated as paid when profits are £7,105 or more, so it doesn't add a cash cost.

Other income, such as a salary taxed through PAYE, uses up your allowance and bands first, which can push more of your self-employed profit into a higher rate.

Estimate your tax and monthly set-aside

A rule of thumb, and why it's only a start

Many people put aside a flat 20% to 30% of profit. Our calculator shows why a single figure can mislead: on £20,000 of profit the bill is about £1,930 (roughly 10%), while on £40,000 it's about £7,130 (roughly 18%), and the rate climbs faster once profit passes £50,270. Working out your own figure each month is safer than guessing.

Payments on account, explained

Once your bill is £1,000 or more, HMRC usually asks for payments on account: two advance payments towards next year's bill, each half of the tax you owed last year. They're due by midnight on 31 January and 31 July. You don't have to make them if last year's bill was under £1,000, or if more than 80% of your tax was already collected another way, for example through your tax code.

Any tax still owed after those two payments is a balancing payment, due by 31 January after the tax year ends.

The first-year surprise

Your first big bill is often bigger than people expect, because on the same 31 January you pay the whole of last year's bill and the first payment on account for the current year.

For example, if your first year's tax and Class 4 NI come to £7,131.80 (about £40,000 of profit), the 31 January payment is £7,131.80 plus a first payment on account of £3,565.90, so £10,697.70. A second payment on account of £3,565.90 follows on 31 July. Setting money aside from your first month avoids that shock.

Key dates for the 2026-27 year

• 5 October after the tax year ends: tell HMRC if you need to file a return for the first time.
• 31 October: paper return deadline.
• 30 December: online return deadline if you want a smaller amount collected through your tax code.
• 31 January: online return deadline, plus the balancing payment and the first payment on account.
• 31 July: second payment on account.

For the 2025-26 tax year, the online return and payment are due by 11:59pm on 31 January 2027.

Making Tax Digital for Income Tax

Sole traders and landlords whose qualifying income was over £50,000 in 2024-25 should have started using Making Tax Digital for Income Tax from 6 April 2026. The threshold falls to £30,000 (based on 2025-26) from 6 April 2027 and £20,000 (based on 2026-27) from 6 April 2028. It changes how you keep records and report, not how much tax you owe.

Plan it in one spreadsheet

The UK Self Assessment Tax Set-Aside & Payments-on-Account Planner from Tidy Sheets turns your income into a monthly set-aside, tracks what you've saved, works out payments on account and lists your payment dates. It's coming to the shop soon. In the meantime, the Free £1,000 Trading Allowance Checker is ready to download.

Get the free checker

Lowering your profit first? See the mileage and allowable expenses guide and the £1,000 trading allowance guide.

Official sources

Income Tax rates and Personal Allowances (GOV.UK)
Self-employed National Insurance rates (GOV.UK)
Payments on account (GOV.UK)
Self Assessment deadlines (GOV.UK)
Making Tax Digital for Income Tax (GOV.UK)

Scotland has different income tax bands. Student loans, capital gains, pensions and other special cases are outside this page's scope.