Answers · UK 2025/26

How much tax does a self-employed person pay on £40,000 profit?

A self-employed person with £40,000 taxable profit in 2026/27 pays £5,486 Income Tax and £1,645.80 Class 4 National Insurance, keeping £32,868.20 after tax and NI -- around £2,000 more than an employee on the same £40,000 gross salary, because there is no employee Class 1 National Insurance to pay.

Last updated: 3 July 2026Last reviewed: 3 July 2026How we verify

Full answer

Self-employed people pay Income Tax on their trading profit (turnover minus allowable business expenses) using the same rates and bands as employees, but National Insurance works differently. On £40,000 taxable profit for 2026/27: after the £12,570 Personal Allowance, £27,430 is taxable, entirely within the 20% basic rate band, giving £5,486 Income Tax -- identical to an employee on the same figure. Class 4 National Insurance is charged at 6% on profits between the £12,570 Lower Profits Limit and the £50,270 Upper Profits Limit, so 6% of £27,430 = £1,645.80. Class 2 National Insurance was abolished for most self-employed people from April 2024 (though voluntary Class 2 payments remain available for those with profits below the Small Profits Threshold to protect State Pension entitlement). Total deductions of £7,131.80 leave £32,868.20 after tax and National Insurance, compared with £32,319.60 that an employee on a £40,000 salary would take home after paying 8% employee Class 1 National Insurance instead of the lower 6% Class 4 rate. Self-employed tax and NI is normally paid through Self Assessment by 31 January following the tax year, often alongside a "payment on account" toward the following year's bill.