Sole traders pay Income Tax and Class 4 National Insurance on taxable profit — turnover minus allowable business expenses. This page sets out the exact 2026/27 rates and thresholds so you can see what applies to each slice of your profit, including the different bands that apply to Scottish taxpayers.
Written and reviewed by James Whitfield · Updated August 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
For 2026/27 a sole trader's first £12,570 of profit is tax-free (Personal Allowance). Income Tax is then 20% up to £50,270, 40% up to £125,140 and 45% above. On top, Class 4 National Insurance is 6% on profit between £12,570 and £50,270, then 2% above £50,270. Class 2 NI is no longer payable for most sole traders. Scottish taxpayers use different Income Tax bands, but Class 4 NI is the same UK-wide.
Sole traders pay Income Tax at the same rates as employed people, but on taxable profit rather than salary. For 2026/27, the first £12,570 of profit is covered by the Personal Allowance and is tax-free. Profit above that is taxed in bands.
The basic rate of 20% applies to taxable profit from £12,570 to £50,270. The higher rate of 40% applies from £50,270 to £125,140. The additional rate of 45% applies to profit above £125,140.1 These thresholds cover taxpayers in England, Wales and Northern Ireland; Scottish taxpayers use different bands (covered below).
Only the slice of profit within each band is taxed at that band's rate. A sole trader with £60,000 profit does not pay 40% on all of it — they pay 20% on the profit between £12,570 and £50,270, and 40% only on the £9,730 that falls above £50,270.
On top of Income Tax, sole traders pay Class 4 National Insurance on profit. For 2026/27 the rate is 6% on profit between £12,570 and £50,270, and 2% on profit above £50,270.2 Class 4 NI is paid through Self Assessment alongside Income Tax.
Class 2 National Insurance, which used to be a flat weekly charge, is effectively no longer payable for most sole traders — those with profits above the small profits threshold are treated as having met their contributions without paying it. Anyone with very low profits can still choose to pay Class 2 voluntarily to protect their State Pension record.
Class 4 NI is set by Westminster and is identical across England, Wales, Scotland and Northern Ireland. Two sole traders on the same profit pay the same Class 4 NI wherever they trade — only the Income Tax layer differs by nation.
The £12,570 Personal Allowance is the amount of profit you can earn before Income Tax applies. It is not reduced by Class 4 NI, which starts at the same £12,570 threshold.
Once taxable profit exceeds £100,000, the Personal Allowance is reduced by £1 for every £2 of profit above £100,000. This means the allowance is fully withdrawn once profit reaches £125,140. In the £100,000–£125,140 band, the combination of 40% tax and the disappearing allowance produces an effective marginal rate of around 60% on that slice of profit.
This taper is why sole traders with profits near £100,000 sometimes make a pension contribution — reducing taxable profit back below £100,000 can restore part or all of the Personal Allowance.
Scotland sets its own Income Tax bands. For 2026/27 the starter rate of 19% applies from £12,571 to £16,537, the basic rate of 20% from £16,538 to £29,526, the intermediate rate of 21% from £29,527 to £43,662, the higher rate of 42% from £43,663 to £75,000, the advanced rate of 45% from £75,001 to £125,140, and the top rate of 48% above £125,140.1
The practical effect is that Scottish sole traders on middle-to-higher incomes often pay more Income Tax than those elsewhere in the UK — particularly on profit between £43,663 and £50,270, where Scotland charges 42% while the rest of the UK still charges 20%. At lower profit levels the 19% starter rate can make Scotland marginally cheaper.
Class 4 NI is unchanged in Scotland: 6% then 2% on the same thresholds. To apply Scottish bands, select Scotland in the calculator's region selector.
Here is how the rates land at three common profit levels for England, Wales and Northern Ireland. Each row is total Income Tax plus Class 4 NI, and the take-home that leaves.
| £30,000 profit — tax £4,532, take-home £25,468 | 15.1% effective |
| £50,000 profit — tax £9,732, take-home £40,268 | 19.5% effective |
| £60,000 profit — tax £13,889, take-home £46,111 | 23.1% effective |
Income Tax is 20% on taxable profit from £12,570 to £50,270, 40% from £50,270 to £125,140, and 45% above £125,140. Class 4 National Insurance is 6% on profit from £12,570 to £50,270 and 2% above. The first £12,570 of profit is tax-free under the Personal Allowance.
The first £12,570 of taxable profit is covered by the Personal Allowance and is free of Income Tax. Class 4 National Insurance also starts at £12,570. Very small amounts of self-employed income may instead be covered by the £1,000 trading allowance.
For most sole traders, no. Class 2 NI is effectively no longer payable for those with profits above the small profits threshold — they are treated as having met their contributions without paying it. People with very low profits can still pay Class 2 voluntarily to protect their State Pension record.
The Income Tax rates are different — Scotland has six bands ranging from 19% to 48% for 2026/27 — but Class 4 National Insurance is the same across the whole UK at 6% then 2%. Select Scotland in the calculator to apply Scottish bands.
It rises with profit because the rates are progressive. For 2026/27 in England, combined Income Tax and Class 4 NI works out at about 15% of a £30,000 profit, 19.5% at £50,000, and 23% at £60,000. It only climbs toward 30%-plus at much higher profits, and there is an effective 60% band between £100,000 and £125,140 where the Personal Allowance is withdrawn. This is why a flat percentage is a poor guide to what to set aside — use the calculator for your own figure.
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.
Self Assessment checklist, expense tracker and payments on account calendar — all in one practical PDF. Updated for 2026/27.
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