Self-Employed Tax Calculator
Find out what percentage of every invoice to set aside for tax and National Insurance.
How much should you save from every invoice?
The most common financial mistake among newly self-employed people is spending their invoice payments as they arrive without setting aside enough for tax. Unlike employment - where Income Tax and National Insurance are deducted before you receive anything - the self-employed receive their full invoice amount and are responsible for calculating and paying their own tax bill, usually months later.
This calculator tells you the percentage of every invoice to put aside so that when your tax bill arrives, the money is already there.
Your tax bill as a self-employed person has two components. The first is Income Tax, calculated on your taxable profit - your income minus allowable business expenses - using the same bands as employment: 0% on the first £12,570, 20% up to £50,270, and 40% above that. The second is Class 4 National Insurance, charged at 6% on profits between £12,570 and £50,270, and 2% above that.
Allowable expenses reduce your taxable profit and therefore your tax bill. Common examples include business mileage, professional subscriptions, software, home office costs, accountancy fees, and business insurance. Personal expenses are not allowable. If you are unsure whether a cost is allowable, an accountant can advise - the cost of that advice is itself an allowable expense.
If you also have PAYE income from employment, your personal allowance will be partially or fully used against that income. This calculator accounts for that by applying your employed income first, then taxing your self-employed profit at the correct marginal rate on top. People in this situation often have a higher effective tax rate on their self-employed income than they expect.
The percentage this calculator produces is a guide for budgeting purposes. Your actual tax bill is calculated by HMRC through Self Assessment, with the return due by 31 January each year for the previous tax year. HMRC also requires most self-employed people to make payments on account - advance payments toward the following year's tax bill - which can catch people off guard in their second year of self-employment.
Frequently asked questions
What counts as an allowable business expense?
Allowable expenses are costs incurred wholly and exclusively for business purposes. Common examples include accountancy and bookkeeping fees, business insurance, professional subscriptions and memberships, software and tools used for work, business mileage at the approved HMRC rate, and a proportion of home costs if you work from home. You cannot claim personal expenses, client entertainment, or the cost of commuting to a regular workplace. HMRC's guidance on allowable expenses is detailed - if in doubt, ask an accountant.
What is payment on account and why does it matter?
Once your Self Assessment tax bill exceeds £1,000, HMRC requires you to make payments on account - two advance payments toward the following year's tax, each equal to half your current year's bill. These are due on 31 January and 31 July. This means that in your second year of self-employment, you may face a bill of up to 150% of the previous year's tax in a single January payment (the balance owed plus the first payment on account). Setting aside more than this calculator suggests in your first year gives you a buffer against this.
Do I need to register for Self Assessment?
Yes, if your self-employed income exceeds £1,000 in a tax year you must register for Self Assessment with HMRC. You should register by 5 October following the end of the tax year in which you became self-employed. Failure to register on time can result in penalties. You can register at gov.uk/register-for-self-assessment.
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