How much tax will I pay as a freelancer? (UK)

It's the question every new freelancer asks, usually with a slight sense of dread: how much of this is actually mine? The honest answer is that it depends on what you earn — but the shape of it is simple, and once you understand it you can set money aside as you go and never be caught out by a bill. (Tax is one piece of a bigger picture; our complete guide to going freelance covers the rest.)

This guide explains what a UK sole trader pays, in plain English, with worked examples. The figures below are for the 2026–27 tax year; rates and thresholds are set each year, so it's worth a glance at the current gov.uk pages (linked throughout) if you're reading this later.

A quick note first: TrustSolo isn't an accountancy, and nothing here is tax advice. It's a plain-English guide to help you understand roughly what you'll owe. For anything complicated — or simply for peace of mind — an accountant is money well spent.

What you're actually taxed on

The single most important thing to understand is this: you're taxed on your profit, not your turnover. Profit is what's left after you subtract your allowable business expenses from your income. So if you invoice £45,000 in a year but spend £5,000 on the software, equipment and costs of doing the work, you're taxed on £40,000, not £45,000.

Keeping track of those expenses through the year is therefore not just tidiness — it directly lowers your bill. There's also a £1,000 trading allowance: if your self-employed income for the year is £1,000 or less, you generally don't pay tax on it or even need to tell HMRC.

Two things then come out of your profit: Income Tax and National Insurance. Let's take them in turn.

Income Tax: the bands

Income Tax is charged in bands, and — this is the part that reassures people — only the slice of income that falls inside each band is taxed at that band's rate. Crossing into a higher band never means your whole income is taxed more.

For 2026–27 the Income Tax rates and bands are:

• Personal Allowance — the first £12,570 of income is tax-free (0%)
• Basic rate — 20% on income from £12,571 to £50,270
• Higher rate — 40% on income from £50,271 to £125,140
• Additional rate — 45% on income above £125,140

One wrinkle for higher earners: once your income passes £100,000, your Personal Allowance is reduced by £1 for every £2 above that, disappearing entirely at £125,140. Most freelancers won't meet this, but it's why the effective rate climbs steeply in that band.

National Insurance: Class 4 (and Class 2)

On top of Income Tax, the self-employed pay Class 4 National Insurance on their profits. For 2026–27 the Class 4 rates are:

• 6% on profits between £12,570 and £50,270
• 2% on profits above £50,270

There's a bit of good news on the other band. Class 2 National Insurance used to be a flat weekly charge, but most self-employed people no longer pay it — above the small-profits threshold it's now treated as paid, so it still counts towards your State Pension and benefits without you handing anything over.

A worked example

Suppose your profit for the year — income minus expenses — comes to £40,000. Here's the calculation:

• Income Tax: the first £12,570 is tax-free; the remaining £27,430 is all within the basic-rate band, taxed at 20% → £5,486.
• Class 4 NI: 6% on the £27,430 of profit above £12,570 → £1,646.
• Total: about £7,132, leaving you roughly £32,868.

That's an effective rate of around 18% — noticeably less than the "20% plus 6%" the headline rates might suggest, because the tax-free Personal Allowance does a lot of quiet work at the bottom. Here's how it looks across a few profit levels (on profit after expenses, for 2026–27):

| Profit | Income Tax | Class 4 NI | Total | |--------|-----------|-----------|-------| | £25,000 | £2,486 | £746 | £3,232 | | £40,000 | £5,486 | £1,646 | £7,132 | | £60,000 | £11,432 | £2,457 | £13,889 |

These are illustrative, and they cover Income Tax and Class 4 NI only; your actual bill is settled through your Self Assessment return.

The pattern is worth internalising: the more you earn, the higher your effective rate creeps — roughly 13%, 18% and 23% at those three levels — because more of your income sits in the higher bands. That's exactly why a flat percentage set-aside, adjusted upward as you grow, works so well.

If you have a student loan, add it on top

This is the line most commonly missing from a freelancer's mental sums, and it isn't small. As an employee your repayments came out of your salary automatically and you may never have thought about them. Self-employed, they don't disappear — HMRC works out how much you repay from your Self Assessment return, so they arrive as part of the same January bill as your tax.

You repay a percentage of income above a threshold, and which one depends on your plan:

| Plan | Threshold | Rate | |------|-----------|------| | Plan 1 | £26,900 | 9% | | Plan 2 | £29,385 | 9% | | Plan 4 (Scotland) | £33,795 | 9% | | Plan 5 | £25,000 | 9% | | Postgraduate Loan | £21,000 | 6% |

Take the £40,000 example above. On Plan 2, that's 9% of the £10,615 above the threshold — about £955 on top of the £7,132, which turns an effective rate of 18% into a little over 20%. On Plan 5 it's nearer £1,350. If you have both an undergraduate and a postgraduate loan, both apply.

None of this is a reason for gloom — it's the same money you'd have repaid as an employee, just visible now instead of invisible. But it belongs in your set-aside from the start, because discovering it in January is exactly the kind of surprise this article exists to prevent.

Payments on account — the first-year surprise

One thing catches almost everyone out the first time. Once your tax bill goes over £1,000, HMRC asks you to start paying towards next year's bill in advance, through payments on account — two instalments, on 31 January and 31 July, each roughly half of your last bill.

The first time this happens, a payment on account effectively lands alongside your actual bill, so that first January total can be markedly bigger than the figures above. It isn't an extra tax — it's paid forward, and it smooths out in later years — but it's much easier to stomach if you're expecting it. We walk through it in full in payments on account, explained.

The simple rule: set aside as you go

You don't need to run this calculation every month. The habit that keeps freelancers out of trouble is boring and effective: move around 25–30% of everything you invoice into a separate pot the moment it lands. It won't be exact — your real bill is settled through Self Assessment — but it means the money is already waiting when the deadline comes, rather than having to be found. If you're a higher earner, or you're repaying a student loan, lean towards the top of that range; if you're just starting out, the lower end is usually plenty.

Where these numbers come from

A few TrustSolo tools do this arithmetic for you. The free rate calculator works forwards — from the take-home you want to a day rate that covers tax, National Insurance and your costs, so you price the bill in from the start (and our UK freelancer rates report shows what others in your field charge). If you'd rather work backwards from what you've already earned, you can estimate your own bill with our free tax calculator — no sign-up needed. And inside the app, TrustSolo keeps a running estimate of your Income Tax and Class 4 NI as you invoice, so you can watch roughly what's building up and keep your set-aside pot topped up. You can see it under tax.

One honest caveat, the same one worth repeating: that figure is an estimate to help you plan — a guide to what's likely owed. It isn't your tax return, and it doesn't file anything to HMRC for you. When your circumstances get more involved, an accountant earns their fee.

Get the set-aside habit going from your very first invoice and tax stops being the thing you dread. When you'd like the estimate kept for you as you work, you can start free — no card required.