How much tax do sole traders pay in the UK?

You pay tax on profit: income minus allowable expenses. In England, Wales and Northern Ireland the 2026/27 Income Tax bands are nothing on the first £12,570, 20% up to £50,270, 40% up to £125,140 and 45% above. The Personal Allowance falls by £1 for every £2 of income over £100,000 and is gone at £125,140.

Scotland has its own bands for 2026/27: 19% from £12,571, 20% from £16,538, 21% from £29,527, 42% from £43,663, 45% from £75,001 and 48% over £125,140.

National Insurance is the same across the UK:

• Class 4: 6% on profits between £12,570 and £50,270, and 2% above that.
• Class 2: no longer has to be paid. Once profits reach £7,105 it is treated as paid, which protects your State Pension record. Below that you can pay voluntarily at £3.65 a week.

You must register for Self Assessment if you earn more than £1,000 from self-employment in a tax year. Under that, the trading allowance means you usually do not need to.

For the 2025/26 tax year, the deadlines are:

• 5 October 2026: register, if you have not filed a return before.
• 31 October 2026: paper returns.
• 31 January 2027: online returns, and paying the tax you owe.

If you register after 5 October, HMRC gives you three months from its letter to file, but the payment date stays 31 January.

Payments on account are advance payments towards next year's bill, including Class 4 National Insurance. Each is usually half of last year's bill, due by 31 January and 31 July. Anything still owed is the balancing payment, due the following 31 January.

You do not make them if last year's bill was under £1,000, or if more than 80% of your tax was already taken at source, for example through a tax code.

Here is how that plays out. Say your bill for 2025/26 is £6,000 and you made no payments on account towards it. By 31 January 2027 you pay that £6,000 plus a first payment on account of £3,000 towards 2026/27. A second £3,000 follows on 31 July 2027. If your 2026/27 bill turns out to be £7,000, you pay the remaining £1,000 as a balancing payment on 31 January 2028, alongside the first payment on account for 2027/28.

The first year they apply often comes as a shock. The January bill can include the whole of last year's tax plus the first payment on account for the current year. If you expect lower profits, you can ask HMRC to reduce them online or on form SA303. If your final bill turns out higher, you pay interest on the shortfall.

Allowable expenses are costs of running the business. GOV.UK lists office costs, travel, uniforms, staff, stock, insurance and bank charges, premises costs, marketing, trade subscriptions and training related to the business. Money you take for personal use does not count.

Instead of claiming expenses, you can use the £1,000 trading allowance. You cannot use it and claim expenses as well, so it usually suits people with very low costs. Our page on separating your finances covers mixed-use costs and the flat rates for working from home and mileage.

Making Tax Digital for Income Tax means keeping digital records and sending quarterly updates through compatible software. It applies to sole traders and landlords whose qualifying income is over the threshold:

• over £50,000 in 2024/25: from 6 April 2026
• over £30,000 in 2025/26: from 6 April 2027
• over £20,000 in 2026/27: from 6 April 2028

HMRC checks your return each year and writes to you if you are over the line. Some people are exempt, for example if they are digitally excluded, but they still file a normal Self Assessment return. Quarterly updates are due by 7 August, 7 November, 7 February and 7 May. In 2026/27 no penalty points apply to late quarterly updates, though they still apply to late tax returns.

You must register if your VAT-taxable turnover goes over £90,000 in the last 12 months, or you expect it to go over £90,000 in the next 30 days alone. The test is turnover, not profit. You can register voluntarily below the threshold.

If you cross it, you must register within 30 days of the end of the month you went over. Registering late means paying VAT on sales from the date you should have registered, and you may also get a penalty. Keep a running 12-month turnover total as you get close.