Self-employment in the UK comes with significant flexibility — and significant financial responsibility. Tax, National Insurance, pensions, and health are all your problem to sort, and HMRC expects you to report everything accurately through Self Assessment.
Tax and NI for the self-employed
| Tax/NI type | 2026/27 rate | On what |
|---|---|---|
| Income tax (basic rate) | 20% | Profits between £12,571–£50,270 |
| Income tax (higher rate) | 40% | Profits between £50,271–£125,140 |
| Class 4 NI | 6% | Profits between £12,570–£50,270 |
| Class 4 NI (higher) | 2% | Profits above £50,270 |
| Class 2 NI | £3.45/week | If profits above Small Profits Threshold |
The payment on account trap
HMRC requires self-employed people with a tax bill over £1,000 to make "payments on account" — advance payments of your next year's estimated tax, due January 31 and July 31. First-year self-employed people are often blindsided: their first Self Assessment bill is 150% of what they expected (the year's tax + the first advance payment). Set aside 25-30% of every invoice payment for tax.
Key allowable expenses
- Office costs (stationery, postage, computer equipment)
- Travel costs (business journeys — not commuting to a fixed regular workplace)
- Clothing (only specialist clothing required for the work, not general business wear)
- Staff costs (accountant fees, subcontractors)
- Use of home as office (HMRC flat rate or actual costs proportion)
- Marketing and professional development
Pension options for the self-employed
No auto-enrolment means you need to set this up yourself. Options: SIPP (Self-Invested Personal Pension) — full tax relief, flexible contributions. Contributions reduce your income tax bill: a £1,000 SIPP contribution only costs £800 if you're a basic rate taxpayer.
Measure your level now
Apply what you just read and discover your real score in under 2 minutes.
About the author
Enrique 'Kike' Faúndez is an Information Systems and Management Control Engineer from Universidad de Chile, with master’s degrees in Finance from Universidad de Chile and Industrial Engineering from Pontificia Universidad Católica de Chile. He has 15+ years of experience in regulated financial services across finance, operations, and digital product development. He founded CashControlly in Santiago, Chile, with the conviction that personal financial control should not be a privilege, but an accessible and well-designed tool.
- Master's in Finance, Universidad de Chile
- Master's in Industrial Engineering, Pontificia Universidad Católica de Chile
- Information Systems and Management Control Engineer, Universidad de Chile
- AI and ITIL certifications
- 15+ years in regulated financial services
Want to actually apply this?
CashControlly helps you turn this into daily habits. No bank connection required.
Start 7-day free trial