Plenty of sole traders earn less than the Personal Allowance: people starting out, part-timers, carers, students and retired people with a small business. No tax may be due, but there are still rules to follow, and a decision about your State Pension worth making on purpose.
Written and reviewed by James Whitfield · Last reviewed 19 October 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
If your self-employed income before expenses is over £1,000, you must register and send a tax return, even if your profit is under £12,570 and no tax is due.12 With no other income, 2026/27 profit up to £12,570 pays no Income Tax and no Class 4 NI.34 If your profit is £7,105 or more, Class 2 is treated as paid and the year counts toward your State Pension; below that you can pay voluntary Class 2 at £3.65 a week.4 A salary or pension uses up the Personal Allowance first, so profit on top of it is taxed.
Related: £1,000 trading allowance · Register as a sole trader · Employed and self-employed calculator
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Yes, in most cases. GOV.UK says you must send a tax return if you were self-employed as a sole trader and earned more than £1,000, before taking off anything you can claim tax relief on.1 The test is income, not profit, and not whether tax is due. If this is your first year, register by 5 October after the tax year ends: for 2026/27, by 5 October 2027.1
If your self-employed income is £1,000 or less, the £1,000 trading allowance usually means you do not have to tell HMRC.2 You may still choose to register, for example to pay voluntary Class 2 National Insurance, or to claim Tax-Free Childcare or Maternity Allowance based on your self-employment.2
If the business is your only income, the first £12,570 of profit is covered by the Personal Allowance and is below the point where Class 4 NI starts.34 What changes with profit is how the year counts for your State Pension.
| Profit, no other income (2026/27) | Tax + Class 4 / NI record |
| £5,000 | £0 / not credited: voluntary Class 2 optional |
| £9,000 | £0 / Class 2 treated as paid |
| £12,000 | £0 / Class 2 treated as paid |
| £18,000 | £1,411.80 / Class 2 treated as paid |
The Personal Allowance is shared across all your income. If a salary or pension already uses it, your self-employed profit is taxed from the first pound at your marginal rate. Class 4 NI is different: it is worked out on the self-employed profit alone, so profit under £12,570 still pays none.4
Example: £11,000 of profit alongside a £20,000 salary in 2026/27. The salary uses the £12,570 allowance, so the £11,000 is taxed at 20%: £2,200 of extra Income Tax, collected through Self Assessment. Class 4 NI is nil because the profit is below £12,570.
The full new State Pension is £241.30 a week, and you usually need 35 qualifying years to get it, with at least 10 to get any.5 Where profit is £7,105 or more, Class 2 is treated as paid, so the year counts without any payment.4
If your profit is below £7,105 and the year would not otherwise count (for example through a job), voluntary Class 2 at £3.65 a week is a cheap way to fill it: about £190 for a 52-week year. The alternative, voluntary Class 3, is £18.40 a week, about £957 for a 52-week year.4 Check your National Insurance record before paying, in case the year already counts.
A return on time avoids the £100 late-filing penalty, which applies even when no tax is due.6 It also records your profit, which you may need to pay voluntary Class 2 or to show self-employed income for Tax-Free Childcare or Maternity Allowance.2 If your income is over £1,000 but your costs are small, you can deduct the £1,000 trading allowance instead of expenses.2
Yes, if your self-employed income before expenses was over £1,000. The test is income, not whether any tax is due. Register by 5 October after the tax year and file by 31 January.
None, if the business is your only income: £11,000 of profit is under the £12,570 Personal Allowance and the Class 4 threshold in 2026/27. If you also have a salary that uses your allowance, the £11,000 is taxed at 20% (£2,200), but there is still no Class 4 NI.
No Class 4 is due below £12,570 of profit. Profit of £7,105 or more is treated as if Class 2 had been paid, protecting your State Pension record. Below £7,105 you can choose to pay voluntary Class 2 at £3.65 a week.
If total self-employed income before expenses is £1,000 or less, the trading allowance usually means you do not need to tell HMRC or file for it. You may still register to pay voluntary Class 2 or to support a benefit claim.
Often, if your profit is under £7,105 and the year would not otherwise count. At £3.65 a week it is far cheaper than Class 3 at £18.40, and each qualifying year adds to your State Pension. Check your NI record first.
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.