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UK Self-Employed Tax Formula:
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UK self-employed individuals pay Income Tax at 20% and Class 4 National Insurance at 9% on their taxable profits (profits minus allowable expenses). This calculator helps estimate the total tax liability for self-employed individuals in the UK.
The calculator uses the UK self-employed tax formula:
Where:
Explanation: The calculation determines taxable profit by subtracting allowable expenses from total profits, then applies the combined 29% tax rate (20% income tax + 9% National Insurance).
Details: Accurate tax calculation is essential for self-employed individuals to budget for tax payments, meet HMRC deadlines, avoid penalties, and ensure compliance with UK tax laws.
Tips: Enter your total business profits and allowable business expenses in pounds. Ensure expenses are legitimate business costs that HMRC allows. Profits should be greater than or equal to expenses.
Q1: What counts as allowable expenses?
A: Office costs, travel expenses, clothing expenses, staff costs, things you buy to sell on, financial costs, and marketing expenses are typically allowable.
Q2: Are there tax-free allowances for self-employed?
A: Yes, the personal allowance (£12,570 for 2024/25) applies before income tax is calculated on profits.
Q3: When are self-employed tax payments due?
A: Payments on account are due January 31st and July 31st each year, with any balancing payment due the following January 31st.
Q4: Do I need to register as self-employed?
A: Yes, you must register with HMRC when you start working for yourself if your income exceeds £1,000 in a tax year.
Q5: What about VAT registration?
A: You must register for VAT if your taxable turnover exceeds £90,000 in a 12-month period (2024/25 threshold).