How sole trader tax is calculated in 2026/27
As a sole trader you pay tax on your profit — your business income minus your allowable expenses. There's no tax on the first £12,570 (your personal allowance), then Income Tax and Class 4 National Insurance apply on top.
Income Tax bands (2026/27, England, Wales & NI)
| Band | Taxable income | Rate |
|---|---|---|
| Personal allowance | £0 – £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Class 4 National Insurance
- 6% on profits between £12,570 and £50,270
- 2% on profits above £50,270
- Class 2 NIC is no longer compulsory for most sole traders from 2024/25
When do sole traders register for VAT?
VAT is based on turnover (sales), not profit. You must register once your VAT-taxable turnover exceeds £90,000 over any rolling 12-month period, or if you expect to exceed it within the next 30 days. The checker above flags when you're getting close.
Scotland: Scottish taxpayers have different Income Tax bands and rates. This calculator uses England, Wales & Northern Ireland rates. It also excludes student loans, pension relief and other income — treat the result as a guide, not advice.
