Glossary · UK
What is Self-Employment Tax?
Income Tax plus Class 4 National Insurance charged on a sole trader profits through Self Assessment.
Full Definition
A self-employed sole trader pays Income Tax and Class 4 National Insurance on their taxable profit (income minus allowable expenses), reported through Self Assessment. Income Tax uses the same bands as employees. Class 4 NI for 2026/27 is 6% on profits between GBP 12,570 and GBP 50,270, then 2% above. A flat Class 2 charge may also apply at the margins. Unlike PAYE, tax is paid in two payments on account plus a balancing payment, so setting money aside through the year is essential.
How Self-Employment Tax is calculated
Tax = Income Tax(Profit) + Class 4 NI
Class 4 NI = (min(Profit, 50270) - 12570) x 6% + max(0, Profit - 50270) x 2%- Profit
- Income after allowable business expenses.
- 12570 / 50270
- Lower and Upper Profits Limits for Class 4 NI (2026/27).
- 6% / 2%
- Main then upper Class 4 NI rate.
Worked example: On GBP 40,000 profit (England): Income Tax = (40,000 - 12,570) x 20% = GBP 5,486; Class 4 NI = (40,000 - 12,570) x 6% = GBP 1,645.80; total about GBP 7,132.