What are the 2025-26 UK income tax rates?

For 2025-26, the personal allowance is £12,570. The basic rate is 20% on income from £12,571 to £50,270. The higher rate is 40% on income from £50,271 to £125,140. The additional rate is 45% on income above £125,140. The personal allowance tapers by £1 for every £2 earned above £100,000.

How does Class 2 and Class 4 NI work for sole traders?

Mandatory Class 2 NI was abolished from 6 April 2024. Self-employed people with profits above the Lower Profits Limit (£12,570) are automatically treated as having paid Class 2 for pension/benefit entitlement (£0 charge). Those with profits below the Small Profits Threshold (£6,725) can pay Class 2 voluntarily (currently £3.50/week) to protect their State Pension record. Class 4 NI is 6% on profits between £12,570 and £50,270, plus 2% on profits above £50,270.

What are payments on account?

If your total income tax and Class 4 NI liability exceeds £1,000, HMRC requires two advance payments (payments on account) towards next year's bill. Each payment is half the previous year's tax and Class 4 NI. They are due on 31 January and 31 July. You can apply to reduce them if your income is expected to fall.

Can pension contributions reduce my tax bill?

Yes, personal pension contributions receive tax relief. Basic rate relief (20%) is usually added automatically by your pension provider. If you are a higher rate taxpayer, you claim the extra 20% through your self assessment return. Pension contributions also extend your basic rate band, potentially reducing higher rate tax.

What is the trading allowance?

The trading allowance gives you £1,000 of tax-free trading income per year. If your gross trading income is £1,000 or less, you do not need to declare it. If your income is above £1,000, you can choose to deduct the £1,000 allowance instead of your actual expenses, whichever gives the better result.

TradeCalculator.co.uk

Self Assessment Tax Calculator

Calculate self assessment income tax, National Insurance and payments on account for sole traders

Gross Income

Allowable Expenses

Tax Year

Employment Status

How We Calculate This

Enter your gross income and allowable expenses to calculate taxable profit. The calculator applies the personal allowance (tapered above £100,000), then calculates income tax across all three bands (20%, 40%, 45%). National Insurance Class 2 (flat weekly rate) and Class 4 (percentage of profits) are added. Student loan repayments, pension relief, gift aid, and the trading allowance are factored in. The result shows your total tax bill, payments on account, and effective tax rate.