How to Calculate Self-Assessment Tax UK: Complete Guide for 2026
Understanding Self-Assessment Tax
Self-Assessment is how HMRC collects Income Tax from self-employed individuals, sole traders, and freelancers. Unlike PAYE employees who have tax deducted automatically, you must calculate and pay your own tax.
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Step-by-Step: How to Calculate Your Tax Bill
Step 1: Calculate Your Taxable Profit
Formula: Total Income - Allowable Expenses = Taxable Profit
Example:
- Total income: £45,000
- Allowable expenses: £8,000
- Taxable profit: £37,000
Step 2: Deduct Your Personal Allowance
For 2025/26, the Personal Allowance is £12,570. You don't pay tax on this amount.
Example: £37,000 - £12,570 = £24,430 (taxable income)
Step 3: Apply Income Tax Rates
| Income Band | Tax Rate | Tax on £24,430 |
|---|---|---|
| £0 - £12,570 | 0% (Personal Allowance) | £0 |
| £12,571 - £50,270 | 20% (Basic Rate) | £4,886 |
Step 4: Add National Insurance Contributions
Class 2 NI: £3.45/week (£179.40/year) if profits exceed £12,570
Class 4 NI: 9% on profits between £12,570-£50,270
Example: (£37,000 - £12,570) × 9% = £2,198.70
Total Tax Bill
- Income Tax: £4,886
- Class 2 NI: £179.40
- Class 4 NI: £2,198.70
- Total: £7,264.10
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- Personal Allowance: £12,570 (0%)
- Basic Rate: £12,571 - £50,270 (20%)
- Higher Rate: £50,271 - £125,140 (40%)
- Additional Rate: Over £125,140 (45%)
When to Pay Your Tax
Self-Assessment tax is paid in three installments:
- First Payment on Account: 31 January (50% of last year's bill)
- Second Payment on Account: 31 July (remaining 50%)
- Balancing Payment: 31 January (any additional tax owed)
Common Mistakes to Avoid
- Forgetting to deduct allowable expenses
- Not setting aside money for tax throughout the year
- Missing the 31 January deadline (£100 penalty)
- Underestimating National Insurance contributions
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Start 7-Day Free TrialFrequently Asked Questions
How do I calculate my Self-Assessment tax bill?
Calculate your taxable profit (income minus expenses), deduct your Personal Allowance (£12,570 for 2025/26), then apply the tax rates: 20% on income up to £50,270, 40% on income between £50,271-£125,140, and 45% above £125,140.
What is the Personal Allowance for 2026?
The Personal Allowance for the 2025/26 tax year is £12,570. This means you don't pay tax on the first £12,570 of your income.
Do I need to pay National Insurance as a sole trader?
Yes. You pay Class 2 NI (£3.45/week if profits exceed £12,570) and Class 4 NI (9% on profits between £12,570-£50,270, 2% above £50,270).
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