Estimating Your Self-Assessment Tax Bill (2026/27)

The Breakdown - Where Your Money Goes

Your tax bill isn't a single figure; it's a composite of three (sometimes four) distinct liabilities. Understanding the mechanics helps you plan effectively.

Income Tax (Rest of UK)

• Personal Allowance: The first £12,570 of your profit is tax-free.
• Basic Rate (20%): Charged on profits between £12,571 and £50,270.
• Higher Rate (40%): Charged on any profit above £50,270.

Note: These thresholds remain frozen until 2028, meaning "fiscal drag" pulls more people into higher brackets as they earn more.

Class 4 National Insurance (The Variable)

This is the standard healthcare/state levy for the self-employed.

• The main rate is 6% for the 2026/27 tax year (unchanged since 2024/25).
• It applies to profits between £12,570 and £50,270. Above this, it drops to 2%.

Important - Are you a Scottish Resident?

If your main home is in Scotland (tax code starts with 'S'), you pay Scottish Income Tax on your earnings. The bands differ significantly from the rest of the UK.

While low earners (under £17k) pay slightly less, anyone earning above roughly £30k pays more than their English counterparts.

Note: These rates apply to your salary and self-employed profits. Dividends and Savings interest are still taxed at the UK-wide rates.

The "Silent Killer" - Payments on Account

This is where new sole traders get caught out. If your total tax bill is over £1,000, HMRC activates "Payments on Account." This system assumes you will earn the same amount next year, and demands you pay tax in advance.

Two things switch it off: you do not make Payments on Account if your last tax bill was under £1,000, or if more than 80% of your tax was already collected at source - for example through PAYE on a salary you hold alongside your self-employment.

From 2026: Making Tax Digital changes how you file

If your combined self-employment and property turnover is over £50,000, you are now in Making Tax Digital for Income Tax (mandatory from 6 April 2026; the threshold drops to £30,000 in 2027 and £20,000 in 2028). You send four quarterly digital updates plus a final declaration that replaces the old SA100 return - the 31 January payment deadline is unchanged. See our Making Tax Digital for Income Tax guide.

Reducing the Bill - Allowable Expenses

You pay tax on profit, not revenue. The most effective way to lower your bill (legitimately) is to ensure you are claiming every valid expense. HMRC applies the "Wholly and Exclusively" rule. You can claim:

• Office Costs: Stationery, phone bills, and software subscriptions (like Xero or QuickBooks).
• Travel: Train tickets, parking, and fuel (if using mileage allowance) for business trips. Note: Commuting from home to a regular workplace is NOT claimable.
• Use of Home: If you work from home, you can claim a flat rate (Simplified Expenses) or a proportion of your utility bills based on floor space/hours worked.