Navigating UK tax on self-employment income in 2025 can be challenging, especially with changing tax rates, National Insurance rules, and filing deadlines. Whether you’re a freelancer, sole trader, or contractor, understanding how self-employment income is taxed in the UK is essential to staying compliant and avoiding costly mistakes. In this complete guide, we explain everything you need to know about UK tax on self-employment income — from how your taxes are calculated to tips for reducing your liability.
What Counts as Self-Employment Income for UK Tax Purposes
Self-employment income is any income earned through trading goods or services. This is likely to be the case if you:
- Are paid for a service you provide (hairdressers, beauticians, tutors etc.)
- Sell regularly to make a profit either online (Amazon, eBay etc.) or in person (car boot sales, through classified ads etc.)
- Make items to sell for profit either online (Etsy, Facebook Marketplace etc.) or in person (market stands, roadshows etc.)
- Earn commission from selling goods for other people
A common misconception is that tax is due when selling used and unwanted items on sites like eBay or Vinted. If you are selling your old belongings, this is unlikely to meet the definition of a trade and it should only be considered for tax purposes if you regularly buy and sell items with the intention of making a profit.
It doesn’t matter whether your self-employment income is your main source of income or a side hustle, if it meets the definition of a trade then the income generated is taxable.
Allowable Expenses to Reduce UK Tax on Self-Employment Income
Claiming allowable expenses is one of the easiest ways to reduce UK tax on self-employment income and maximise your profits.
UK income tax on self-employment income is due on the profits generated from the trade. This is calculated as total gross income less any allowable expenses related to running the business.
When determining the amount of business expenses to deduct, you have two options:
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- Deduct the actual costs of the business expenses incurred; or
- Deduct the Trading Allowance of £1,000.
You are able to choose the most beneficial of the two options above for each tax year you are self-employed however you cannot deduct the Trading Allowance and your actual expenses. Therefore, if your business expenses are less than £1,000, it will be beneficial to claim the Trading Allowance as a deduction against your self-employment income.
Should you elect to deduct actual expenses, common examples of business expenses that are allowable for UK tax purposes are:
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- The cost of stock or raw materials that you buy to sell on.
- Office costs – rent, heating, lighting, utilities, stationery, phone bills etc.
- Training courses related to your business
- Travel costs – fuel, parking, train or bus fares etc.
- Clothing expenses – uniforms etc.
- Staff costs – salaries of employees or subcontractors
- Financial/professional costs – insurance, professional subscriptions, bank charges etc.
- Advertising and marketing costs
Record Keeping For UK Tax on Self-Employment Income
You must keep records of your self-employment income and expenses for UK tax purposes. You do not need to submit the records to HMRC however they must be retained to calculate the UK tax on your self-employment income. In the event of a HMRC enquiry, HMRC will request copies of these records to validate your self-employment income and justify any UK tax fee deductions that have been claimed.
You must keep your records for 5 years after 31 January following the end of the tax year. I.e. for the 2025/26 UK tax year, records must be kept until 31 January 2032.
How Is UK Tax on Self-Employment Income Calculated In 2025?
The HMRC calculation for UK tax on self-employment income depends on your total taxable income and applicable tax bands. The UK tax on self-employment income is calculated using the ‘non-savings’ rates which are the same rates as those applied to employment income. The 2025/26 rates are:
| Band | Taxable income | Tax rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | over £125,140 | 45% |
The above thresholds apply to your total taxable income and therefore, if you also have other sources of UK taxable income (rental income, bank interest, dividends etc.) or are also employed, your self-employment income is taxed at the highest rate that the income falls into.
For example, if you earn a salary of £30,000 and self-employment profit of £5,000, the £5,000 self-employment profit sits wholly in the basic rate band and the tax due on that income is £1,000 (£5,000 x 20%).
*If your UK taxable income exceeds £100,000, you will start to lose entitlement to the personal allowance. The rates shown are for English and Welsh taxpayers. Individuals living in Scotland are subject to different rates of tax.
National Insurance Rates on UK Self-Employment Income in 2025
Self-employment income is subject to Class 4 National Insurance however the amount due is based on your taxable profit. The 2025/26 rates are as follows:
If your profits are less than £6,725 in the year; you do not have to pay any National Insurance. However, if you do not pay National Insurance via another means (an employment for example), the year will not count as a qualifying year for State Pension purposes. You may therefore wish to pay voluntary Class 2 NIC at a rate of £3.45 per week for the year to be qualifying for the State Pension.
If your profits are between £6,725 and £12,570 in the year; you do not have to pay any National Insurance. In addition, Class 2 NIC contributions are deemed to have been paid and therefore your National Insurance record is protected without you having paid any NIC.
If your profits are above £12,570 in the year; you do have to pay Class 4 National Insurance at the following rates:
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- 6% on profits between £12,570 and £50,270
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- 2% on profits over £50,270
The tax and NIC due on your self-employment income is typically paid via a self-assessment tax return which is explained in a later section.
Student Loan Repayments on UK Self-Employment Income
Self-employment income is subject to Student Loan repayments contingent on your total income level. Therefore if you are already subject to Student Loan repayments due to your employment income, your full self-employment profit will be subject to Student Loan repayments at 9% (or 6% for Postgraduate Student Loans).
VAT Rules for UK Tax on Self-Employment Income
VAT registration can affect how much UK tax on self-employment income you ultimately pay. Understanding VAT rules is critical when managing your UK tax on self-employment income, as registration thresholds can affect your overall liability.
You must register for VAT if:
- Your total taxable turnover for the past 12 months exceeded £90,000; or
- You expect your total taxable turnover to exceed £90,000 in the next 30 days.
You must also register (regardless of taxable turnover) if all of the following are true:
- You’re based outside the UK; and
- Your business is based outside the UK; and
- You supply any goods or services to the UK
UK Tax on Self-Employment Income: Deadlines and Filing Rules
Missing your filing deadlines can lead to penalties and higher UK tax on self-employment income costs.
If your self-employment income is less than the Trading Allowance of £1,000, the allowance applies automatically and you are not subject to tax/NIC nor are you required to declare your income to HMRC.
If your self-employment income is more than £1,000 and you made a profit in the tax year, you are required to declare this to HMRC via a self-assessment tax return. You must first register for self-assessment via Check how to register for Self Assessment – GOV.UK.
The deadline to register for self-assessment is 5 October following the end of the tax year. i.e. for 2025/26 UK tax returns, you must register by 5 October 2026.
Once registered, HMRC will issue you with a Unique Taxpayer Reference (UTR) which is a 10 digit identification number necessary to file your tax return.
The deadline to file your tax return and pay any outstanding liabilities is 31 January following the end of the tax year. i.e. the 2025/26 UK tax return filing and payment deadline is 31 January 2027.
HMRC will levy interest and penalties if your tax return and payments are not made by this date.
If you need expert advice on UK tax on self-employment income, please contact us to schedule a free no obligation consultation via: Contact Expat Tax Solutions UK
UK Tax On Self-Employment Income FAQs
Do I have to pay UK tax on self-employment income?
Self-employment is UK taxable income however if your total self-employment income for the tax year is less than £1,000, you do not need to declare or pay tax on it due to the Trading Allowance.
How much UK tax on self-employment income do I pay?
UK tax on self-employment income is calculated at your marginal tax rate. Therefore 20%, 40% and 45% rates will apply depending on your total UK taxable income during the year.
How do I declare and pay UK tax on self-employment income?
Self-employment income is declared through a self-assessment tax return. The deadline to file your return and pay the relevant tax is 31 January following the end of the tax year. I.e. the deadline for the 2025/26 tax year is 31 January 2027.
What are the penalties if I don't declare UK tax on self-employment income?
If a tax return is filed late, a £100 late filing penalty applies. Penalties are levied while the return remains outstanding with up to £1,600 of penalties applying to tax returns that are one year late. In addition, late payment penalties and interest apply relating to unpaid tax. HMRC may also levy further penalties if they believe tax returns were deliberately not filed.
Do I pay UK tax on self-employment income if I live abroad?
Your exposure to UK tax depends on your UK tax residence status. UK tax residents are taxable on their worldwide income and gains whereas UK tax non-residents are only taxable on their UK sourced income which would only include self-employment income to the extent you perform the work duties in the UK.
Get Expert Help With UK Tax on Self-Employment Income
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