FREE TOOL · 2026/27 RATES
Sole TraderTax Calculator UK
Calculate your Income Tax, National Insurance and take-home pay for 2026/27 — based on your actual income, expenses and pension contributions.
Sole trader tax calculator
Van costs, tools, insurance, materials, accountancy, phone, workwear, etc.
Personal pension contributions reduce your taxable profit — annual limit is £40,000 or 100% of earnings.
Registered for VAT?
Affects your VAT threshold warning only
Your 2025/26 tax estimate
Based on £35,000 income − £5,000 expenses − £0 pension = £30,000 taxable profit
Monthly tax to set aside
£378
£4,532total tax bill ÷ 12 months
Monthly take-home
£2,122
after tax & NI
Annual take-home
£25,468
after tax & NI
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Effective tax rate
15.1%
of your taxable profit
Tax breakdown
6% on profits £12,571–£50,270
How is this calculated?
Step 1 — Taxable profit: Income minus allowable expenses minus pension contributions. This is the figure HMRC taxes.
Step 2 — Personal Allowance:The first £12,570 of profit is tax-free. Above £100,000 the allowance tapers — you lose £1 for every £2 of profit above £100,000, reaching zero at £125,140.
Step 3 — Income Tax bands:20% on £12,571–£50,270 (basic rate), 40% on £50,271–£125,140 (higher rate), 45% above £125,140 (additional rate).
Step 4 — Class 2 NI: Abolished from April 2024. You no longer pay the flat weekly Class 2 charge.
Step 5 — Class 4 NI:6% on profits £12,571–£50,270, then 2% on profits above £50,270.
Step 6 — Take-home:Income minus expenses minus total tax bill. Note: pension contributions reduce your tax but are not “taken home” — they go into your pension pot.
This calculator uses 2026/27 rates. It provides an estimate only and does not constitute tax advice. Consult a qualified accountant for your personal tax situation.
Your sole trader tax, step by step
HMRC taxes sole traders on their net profit — not their gross turnover. Understanding each layer helps you plan ahead and avoid a nasty Self Assessment surprise every January.
Reduce your income with expenses
Every pound you spend wholly and exclusively for business reduces your taxable profit by a pound. A van that costs £5,000/year in running costs saves a basic-rate tradesman £1,000 in tax and £300 in NI. Keep every receipt.
Use your Personal Allowance
The first £12,570 of profit is completely tax-free. Once you cross that threshold you start paying Income Tax at 20%, then 40% above £50,270. Planning your income across tax years can help keep you in the lower band.
Account for both classes of NI
Many tradesmen forget Class 4 NI when budgeting. At £50,000 profit you owe around £2,292 in Class 4 NI on top of your income tax. It's paid via Self Assessment alongside your tax bill in January — set it aside monthly.
Pay on account — prepare for double bills
In your second year of trading HMRC usually requires “payments on account” — 50% of your estimated bill in January, then another 50% in July. Your first January bill can be 150% of your normal annual bill. The monthly set-aside figure above smooths this out.
A typical sole trader plumber's tax bill
Marcus is a sole trader plumber in the Midlands earning £48,000/year. He has £8,000 of allowable expenses (van, tools, insurance, accountancy) and pays £2,000/year into a personal pension:
Income
£48,000
Expenses + Pension
£10,000
Taxable Profit
£38,000
Effective Rate
~19%
Marcus sets aside each month
£668/month
£4,686 Income Tax + £3,327 Class 4 = £8,013/yr
Names are illustrative. Use the calculator above for your own income, expenses and pension figures.
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Frequently asked questions
Everything UK sole trader tradesmen ask about tax.
What counts as an allowable expense for a tradesman?
HMRC allows sole traders to deduct expenses that are wholly and exclusively for business purposes. For tradesmen this includes: tools and equipment, van running costs (fuel, insurance, servicing, MOT), work clothing and PPE, public liability and professional indemnity insurance, accountancy and bookkeeping fees, phone and broadband used for work, materials and subcontractor costs, training and professional subscriptions, and a portion of your home office costs if you work from home. Keep all receipts — HMRC can ask for evidence up to 7 years later.
Do I pay NI as a sole trader?
Yes — you pay National Insurance as a sole trader. Class 2 NI was abolished from April 2024, so you no longer pay the flat weekly charge. Class 4 NI is still charged: 6% on profits between £12,571 and £50,270, and 2% on profits above £50,270. Both are calculated on your net profit after expenses and paid via your Self Assessment return in January.
What's the VAT registration threshold for 2026/27?
The VAT registration threshold for 2026/27 is £90,000 in taxable turnover over any rolling 12-month period. Once you exceed this you must register for VAT within 30 days and start charging VAT on your services. Being VAT registered has advantages (you can reclaim VAT on materials and tools) and disadvantages (more admin and your quotes look 20% more expensive to non-VAT-registered customers). If you're close to the threshold, consider the VAT Flat Rate Scheme which simplifies accounting.
Should I be setting aside 20–30% of income for tax?
It depends on your profit level, but 20-30% is a sensible rule of thumb for most tradesmen. At £35,000 profit your effective tax rate (Income Tax + NI) is around 15-18%, so 20% is a comfortable buffer. At £55,000 profit you're into the 40% higher-rate band on some of your income, so 25-30% is more appropriate. The calculator above gives you a precise monthly set-aside figure based on your actual numbers — use that rather than a rough percentage to avoid nasty surprises in January when your Self Assessment payment is due.
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