Self-Employed Tax Guide UK 2026/27
Income tax, National Insurance, VAT, and Making Tax Digital — everything you need to know for the 2026/27 tax year.
Key Numbers for 2026/27
Personal Allowance
£12,570
Basic Rate (20%)
£12,571 – £50,270
Higher Rate (40%)
£50,271 – £125,140
VAT Threshold
£90,000
Income Tax for Self-Employed
As a self-employed individual, you pay income tax on your taxable profits— that's your total income minus allowable business expenses. The rates for 2026/27 are:
| Band | Taxable Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
The personal allowance tapers by £1 for every £2 earned above £100,000, disappearing entirely at £125,140.
National Insurance Contributions
Self-employed workers pay two types of National Insurance:
- Class 2 NI — a flat rate of £3.45 per week (payable if profits exceed £12,570). Paid through self-assessment.
- Class 4 NI — 6% on profits between £12,570 and £50,270, plus 2% on profits above £50,270. Also collected via self-assessment.
VAT — Do You Need to Register?
The VAT registration threshold is £90,000. You must register if your taxable turnover exceeds this in any rolling 12-month period. You can also register voluntarily below the threshold.
💡 When Voluntary Registration Makes Sense
If most of your clients are VAT-registered businesses, voluntary registration lets you reclaim VAT on your expenses without affecting their costs. It also signals that your business has substance. Read our full VAT registration guide.
Record-Keeping Requirements
HMRC requires you to keep accurate records of:
- 📁 All sales and income
- 📁 All business expenses (with receipts)
- 📁 VAT records (if registered)
- 📁 Bank statements
- 📁 Invoices sent and received
- 📁 Mileage logs for business travel
Records must be kept for at least 5 years after the 31 January submission deadline for that tax year.
Making Tax Digital (MTD)
Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is being rolled out in phases:
- April 2026: Self-employed and landlords with qualifying income over £50,000 must use MTD-compatible software for digital record-keeping and quarterly updates.
- April 2027: Extended to those with qualifying income over £30,000.
Under MTD, you submit quarterly updates to HMRC through compatible software instead of a single annual self-assessment return. You still file a final declaration confirming your figures.
Allowable Business Expenses
You can deduct legitimate business expenses from your income to reduce your tax bill. Common allowable expenses include:
- ✅ Office costs (stationery, phone, internet)
- ✅ Travel costs (fuel, train fares, parking — not commuting)
- ✅ Professional services (accountant, solicitor)
- ✅ Software and subscriptions
- ✅ Marketing and advertising
- ✅ Insurance (professional indemnity, public liability)
- ✅ Use of home as office (proportion of rent/mortgage, utilities)
- ✅ Training directly related to your current trade
Frequently Asked Questions
How much tax do I pay as self-employed in the UK?
You pay income tax on profits above £12,570 (20% basic, 40% higher, 45% additional rate) plus Class 2 and Class 4 National Insurance on your self-assessment return.
Do I need to register for VAT if I'm self-employed?
Only if your taxable turnover exceeds £90,000 in any rolling 12-month period. Below this, registration is voluntary.
What is Making Tax Digital and does it apply to me?
MTD for Income Tax requires digital record-keeping and quarterly reporting via compatible software. From April 2026 it applies to those earning over £50,000; from April 2027, over £30,000.
What records must I keep as self-employed?
All income, expenses, bank statements, invoices, receipts, and mileage logs. Keep them for at least 5 years after the 31 January submission deadline.
When do I need to file my self-assessment tax return?
For the 2026/27 tax year, the online deadline is 31 January 2028. Paper returns are due by 31 October 2027. Tax owed must be paid by 31 January 2028.
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