Budget 2026 (28 October 2026) left Income Tax and Class 4 National Insurance rates and thresholds unchanged. The biggest change for small sole traders is the trading allowance, which triples from April 2027. Everything here starts in 2027/28 or later; for 2026/27 nothing changes.
Written and reviewed by James Whitfield · Updated October 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
From 6 April 2027 the trading allowance rises from £1,000 to £3,000, and you won't need to tell HMRC about trading income until it passes £3,000. Class 4 NI stays 6% between £12,570 and £50,270 and 2% above. The mileage rate above 10,000 business miles rises to 35p, and the main writing-down allowance falls to 12%.
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The trading allowance lets an individual earn small amounts of self-employed or casual income without tax, or deduct a flat amount instead of actual expenses. Budget 2026 raises it from £1,000 to £3,000 from 6 April 2027, and the threshold for reporting trading income through Self Assessment rises to £3,000 at the same time.1 Both are to be set in the Finance Bill 2026-27.
Example: £2,400 of sales and £300 of costs. In 2026/27 the £1,000 allowance leaves £1,400 taxable. From 2027/28 the £3,000 allowance covers all £2,400.
Class 4 stays 6% on profits between £12,570 and £50,270 and 2% above, in 2027/28 as now.2 Class 2 is no longer compulsory; the Small Profits Threshold, which decides whether you get National Insurance credits, rises from £7,105 to £7,355, and the voluntary Class 2 rate from £3.65 to £3.80 a week.12
The simplified mileage rate stays 55p a mile for the first 10,000 business miles, now made permanent, and the rate above 10,000 miles rises from 25p to 35p from 6 April 2027.13
The main-pool writing-down allowance falls from 14% to 12% from 6 April 2027 for Income Tax.1 Not settled: the first-year allowance for new main-rate equipment from 1 January 2027, which the Budget text puts at 50% but one Budget table shows as 40%.
Budget 2026 announced that people who join Making Tax Digital in April 2027 won't get penalty points for late quarterly updates in 2027/28. If you joined in April 2026, points apply from 2027/28. This still needs legislation.1
From April 2029 the government plans to replace payments on account with more regular in-year payments towards the final bill. Details and legislation are to follow.1
Yes, from 6 April 2027 (Budget 2026). For the 2026/27 tax year it stays £1,000.
No. It stays 6% on profits between £12,570 and £50,270 and 2% above in 2027/28.
55p a mile for the first 10,000 business miles, then 35p (up from 25p).
The government plans more regular in-year payments from April 2029. It has been announced and still needs legislation, so payments on account continue for now.
The rates, thresholds and rules in this guide are drawn from the official HMRC and GOV.UK sources below, using the confirmed 2026/27 figures. Each link opens the relevant official page in a new tab.
The sole trader tax calculator turns this guidance into a concrete monthly take-home and tax reserve estimate, based on 2026/27 HMRC rates. Enter taxable profit — not turnover.