Self-employed tax & NI estimator

Trading profit and take-home pay are two very different numbers, and the gap between them — income tax plus Class 4 National Insurance — is easy to underestimate until the Self Assessment bill lands. This gives a quick estimate of that gap from profit alone, using the current bands and rates, so there's a rough figure to set aside before the January deadline rather than a guess.

Income tax bands

The first £12,570 of profit is tax-free (the personal allowance). Above that, profit up to £50,270 is taxed at the basic rate, 20%; from £50,270 to £125,140 at the higher rate, 40%; and anything above £125,140 at the additional rate, 45%. These are the same bands that apply to employment income — self-employment doesn't get its own separate scale, though the allowance itself starts tapering away once total income passes £100,000.

Class 4 National Insurance

On top of income tax, self-employed profit above £12,570 attracts Class 4 NI: 6% on profit up to £50,270, then 2% above that. Class 2 NI — the old flat weekly stamp — no longer has to be paid once profit is above the small profits threshold; it's now credited automatically for state pension purposes. Below that threshold, it's payable voluntarily if you want the year to count towards your pension record, which matters most for anyone with a patchy contribution history from earlier years.

A worked example

£40,000 trading profit: income tax is 20% of £27,430 (profit above the allowance) = £5,486. Class 4 NI is 6% of the same £27,430 = £1,645.80. Together that's £7,131.80, leaving take-home of roughly £32,868 — an effective rate just under 18% of profit, before any pension contributions or student loan repayments are factored in. Push profit up past £50,270 and the marginal rate on each extra pound jumps sharply, since both the higher income tax rate and the higher Class 4 band kick in at almost the same point.

What this isn't

This assumes trading profit is the only income, with no employment income, property income, pension contributions or Gift Aid to adjust the bands, and it doesn't apply the personal allowance taper that starts reducing the allowance above £100,000 profit. Rates and thresholds are set in the Budget and can change from one tax year to the next — check gov.uk or your accountant for the figures that apply to the year you're actually filing for.