Take-home net profit £32,868. Self Assessment bill £7,132. Set aside £594 per month.
Set aside for tax
So your January Self Assessment bill doesn't come as a shock.
How it's worked out
| Annual profit | £40,000.00 |
| Less personal allowance | −£12,570.00 |
| Profit subject to income tax | £27,430.00 |
| Basic rate at 20% | £5,486.00 |
| Income tax | −£5,486.00 |
| Class 4 National Insurance | −£1,645.80 |
| Class 2 National Insurance | £0.00 |
| Take-home (net profit) | £32,868.20 |
Class 4 NI for 2026/27 is 6% on profits between £12,570 and £50,270, and 2% above. Class 2 National Insurance is treated as paid if your profits are £7,105 or more in 2026/27, so you build up your State Pension record without paying Class 2. If your profits are below £7,105, you can choose to pay voluntary Class 2 contributions (£3.65 a week) to protect your State Pension record.
Why January can be higher than expected
Your first Self Assessment payment includes next year's first payment on account.
| 31 January 2028 | |
| Tax bill for 2026/27 | £7,131.80 |
| First payment on account (towards 2027/28) | £3,565.90 |
| Total due 31 January 2028 | £10,697.70 |
| 31 July 2028 | |
| Second payment on account | £3,565.90 |
Because your bill is over £1,000, HMRC asks for two payments on account towards next year — so your first January bill can be around 150% of your tax bill. Payments on account may not apply if your bill is under £1,000, or if more than 80% of your tax was already collected at source (for example through PAYE).
Making Tax Digital check
In profit-only mode this is only a rough indication. Making Tax Digital for Income Tax is based on your gross self-employed income (turnover), not your profit — switch to “Turnover & expenses” for a more accurate MTD check. It is being phased in by gross income: over £50,000 from April 2026, over £30,000 from April 2027 and over £20,000 from April 2028.
What to do next
- Keep records of all your income and expenses through the year.
- If this is your first year self-employed, register for Self Assessment by 5 October after the tax year ends.
- Set aside about £594/month so the bill doesn't catch you out.
- File your return and pay any tax due by 31 January 2028.
- Check whether payments on account apply to you — they do here.
Example profits (2026/27)
Frequently asked questions
How much tax do the self-employed pay?
Sole traders pay income tax on their profit using the same bands as employees — no tax up to £12,570, then 20%, 40% and 45% (different bands in Scotland) — plus Class 4 National Insurance. There is no PAYE, so you pay through Self Assessment.
What is Class 4 National Insurance?
For 2026/27, Class 4 NI is 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. It is worked out on your profit, before any personal pension contribution, and paid through Self Assessment.
Do I still pay Class 2 National Insurance?
Class 2 National Insurance is treated as paid if your profits are £7,105 or more in 2026/27 (the Small Profits Threshold), so you build up your State Pension record without paying Class 2. If your profits are below £7,105, you can choose to pay voluntary Class 2 contributions of £3.65 a week to protect your State Pension record.
What are payments on account?
If your tax bill is more than £1,000, HMRC asks for two payments on account towards next year — each 50% of this year’s bill, due by 31 January and 31 July. Your first January payment therefore covers this year’s tax plus the first instalment of next year’s.
How can I reduce my self-employed tax?
Claim all allowable business expenses to lower your profit, and pay into a personal pension — pension contributions reduce your income tax (though not Class 4 NI). Keeping good records and using the trading allowance where it helps can also reduce the bill.
When do I need to register for Self Assessment?
If this is your first year as a sole trader, you usually need to register for Self Assessment by 5 October following the end of the tax year you started — for example, by 5 October 2027 for the 2026/27 tax year. You then file your return and pay any tax due by 31 January.
Related calculators & guides
Sources — official UK figures
A simplified estimate for sole traders using 2026/27 rates. It does not cover VAT, capital allowances, the High Income Child Benefit Charge, the marriage allowance or dividend income. Student loan repayments use the 2026/27 thresholds; the PAYE option estimates the tax already collected on your salary, so your real PAYE figure may differ. For an exact figure, complete a Self Assessment return or speak to an accountant.