Sole Trader Tax Calculator 2026/27

How it's calculated

A sole trader is taxed personally on the profit of their business — turnover less allowable expenses — and settles the bill once a year through Self Assessment, not through PAYE. You can start trading before registering, but GOV.UK says you must register for Self Assessment as a sole trader if you earn more than £1,000 in a tax year. There are two main charges on the profit figure. The first is Income Tax. Most people get a tax-free personal allowance of £12,570; profit above that is taxed in slices — 20% on the first £37,700 of taxable profit (the basic-rate band), 40% on the next slice up to a taxable £125,140, and 45% on anything beyond; eligible relief-at-source pension payments and Gift Aid extend both limits by the gross amount. Once adjusted net income (profit less gross pension and Gift Aid reliefs) passes £100,000 the personal allowance is withdrawn by £1 for every £2 over the threshold and is gone by £125,140, producing an effective 60% rate across that narrow band. The second charge is Class 4 National Insurance, levied directly on profit: for 2026/27 you pay it only if profits are more than £12,570, at 6% on profit over £12,570 up to £50,270 and 2% on profit above £50,270. Class 2 NIC, once a flat weekly stamp, is no longer a compulsory charge from 2024/25 — if your profit is £7,105 or more your contribution record is credited free, so the calculator shows it as £0. Income Tax bands shown here are the England, Wales and Northern Ireland ones; National Insurance is UK-wide and identical everywhere.

Taxable trading profit P = receipts − allowable expenses  OR  max(0, receipts − £1,000 trading allowance)  (never both)
Gross reliefs: RAS pension = net ÷ 0.8; Gift Aid = net ÷ 0.8
Adjusted net income = P − gross reliefs; Personal Allowance = ceil(max(0, £12,570 − max(ANI − £100,000, 0) ÷ 2))
Taxable income = max(0, P − Personal Allowance)
Income Tax = 20% × (up to £37,700 + gross reliefs) + 40% × (up to £125,140 + gross reliefs) + 45% × (above)
Class 4 NIC = 6% × (P from £12,570 to £50,270) + 2% × (P above £50,270)   — personal reliefs do not reduce P
Class 2 NIC = £0 compulsory (credited at or above £7,105)
Tax-adjusted profit after tax = P − Income Tax − Class 4 NIC; cash after payments = cash surplus − tax − net pension − net Gift Aid

Worked example

Take a sole trader living in England with an annual profit of £60,000 for 2026/27, the full personal allowance and no other income:

The effective rate is £13,888.60 ÷ £60,000 = 23.15%, even though part of this profit is taxed at 40%, because the first £12,570 is tax-free and the basic-rate band is taxed at just 20% plus 6% NIC. The marginal rate on the next pound of profit is 42% (40% Income Tax + 2% Class 4 NIC), since this trader is already above the £50,270 higher-rate threshold.

When your result may differ

This calculator covers the 2026/27 tax year for England, Wales and Northern Ireland. Scottish taxpayers receive no calculation. It assumes one sole trade, entitlement to the standard personal allowance and normal Class 4 liability; other income, gains, trading losses and additional tax charges are outside this calculation. Choose either allowable business expenses or the trading allowance for the relevant trading income — not both. The £1,000 allowance is shared across relevant activities and is subject to eligibility and election rules. Expenses you actually paid still reduce your cash even when they are not deducted for tax. Enter personal relief-at-source pension payments and qualifying Gift Aid as the net amounts you paid. An eligible £8,000 pension payment is £10,000 gross; an £800 Gift Aid donation is £1,000 gross. These gross amounts reduce adjusted net income and extend the relevant Income Tax bands. They do not reduce Class 4 trading profit. Pension-provider and charity top-ups are not cash paid back to you, and these reliefs do not always reduce your personal Income Tax bill. The personal allowance tapers when adjusted net income exceeds £100,000; the remaining allowance is rounded up to a whole pound (ITA 2007 s.35(3)). Pension eligibility, earnings limits, annual-allowance charges and sufficient Income Tax or Capital Gains Tax to cover Gift Aid must be checked. Unverified eligibility or an unsupported charge means the result is withheld. Tax-adjusted profit after tax is not necessarily spendable cash. A cash figure is shown only when the required cash information is supplied, and deducts your actual net pension and Gift Aid payments. Voluntary Class 2 contributions, payments on account and other business cash adjustments are not included. This calculator does not submit elections, claim reliefs or determine your filing obligations.

Rates and thresholds

England, Wales and Northern Ireland — 2026/27 tax year, with no pension or Gift Aid relief (gross reliefs extend the basic and higher-rate limits). Income Tax bands are measured on taxable income; Class 4 NIC on trading profit. Class 4 National Insurance is UK-wide.

Sources & legal basis

Update log

• 2026-06-04 — Updated to the 2026/27 tax year; confirmed Class 4 at 6%/2% and the £7,105 Small Profits Threshold for free Class 2 credit.
• 2026-06-15 — Added worked example, rates table and source table; expanded the explanation of Class 2, payments on account and the £100k allowance taper.
• 2026-07-14 — Rechecked current GOV.UK 2026/27 Income Tax, Scottish Income Tax and self-employed National Insurance sources; clarified Self Assessment registration above £1,000 and Class 2/Class 4 wording.
• 2026-09-05 — Correction after the UK Astra thread (evening of 2026-09-05): the additional-rate boundary is taxable income £125,140 (the 40 % band was £12,570 too short; £120,000 → £39,432 not £39,675); tapered allowance rounded up to a whole pound (ITA 2007 s.35(3)); the Scotland option now withholds the result instead of showing EWNI figures with a note.
• 2026-09-06 — Astra verification thread (2026-09-06): trading allowance vs actual expenses as an explicit method (never both), relief-at-source pension and Gift Aid entered net and grossed up (÷ 0.8) to reduce adjusted net income and extend both Income Tax limits without touching Class 4 profit; earnings-limit and Gift Aid coverage checks withhold the result; optional cash surplus gives cash after net payments. £111,000 + £8,000 RAS + £800 Gift Aid → ANI £100,000, PA £12,570, Income Tax £29,632. Stale £112,570 boundary removed from the copy.
• 2026-09-29 — A blank annual profit or receipts field is no longer read as £0: the after-tax profit and Total tax + NIC now show “—” instead of £0.00. An entered £0 is still computed, and the default result is unchanged.