How self employed pay tax (UK guide)

Self-employed people in the UK pay tax by completing a Self Assessment tax return each year and paying Income Tax and National Insurance on their profits.

Understanding how it works

When you work for yourself, you’re responsible for calculating your own tax. HMRC won’t do it automatically.
You need to register as self-employed, keep records of your income and expenses, and complete a Self Assessment tax return each year.

What you actually pay

You’re taxed on your profits, which means your income after allowable business expenses.

Since the 2024/25 tax year, there has been an important change:

• If your profits are above the Small Profits Threshold, you no longer pay Class 2 National Insurance — but you still get the benefits, such as State Pension credits.
• If your profits are below the threshold, you can choose to pay Class 2 voluntarily to protect your contributions record.
• Class 4 National Insurance still applies for most self-employed people and is calculated as part of your tax return.

Payments are normally made through:

• Payments on account – advance payments towards next year’s tax
• Balancing payment – a final payment to settle anything still owed

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What’s coming next: Making Tax Digital (MTD)

MTD for Income Tax is due to start in April 2026 for many self-employed people. This will change how tax reporting works:

• You’ll keep digital records
• You’ll send quarterly updates to HMRC
• You’ll submit a final end-of-year declaration instead of the traditional tax return

This is a big shift, and getting ready early can save stress later.

Why a professional accountant helps

Tax rules change often, and MTD will add even more admin for business owners. Working with a professional accountant gives you peace of mind. They’ll help you stay compliant, claim everything you’re entitled to, avoid penalties, and guide you through new rules like MTD — letting you focus on running your business.