What will I actually owe?
The question every sole trader asks, and the one that is hard to answer from a bank balance, because turnover is not profit and profit is not what you keep.
Turnover, profit, then tax
Tax is charged on profit: income less allowable expenses and capital allowances. Two businesses with identical turnover can owe very different amounts, which is why a percentage-of-turnover rule of thumb is worse than useless.
Income tax and Class 4 together
Self-employed profit attracts both income tax and Class 4 National Insurance, on overlapping but not identical bands. Looking only at the income tax rate understates what you owe, which is the usual reason a January bill surprises someone who thought they had budgeted.
Set aside as you go
The useful output is not the annual figure, it is the amount to reserve per thousand pounds received. Taxmo shows a running effective rate against your actual recorded profit and a suggested reserve, so the money is there when the return is due.
Common questions
How much should I set aside for tax?
It depends on your profit level, because the rates are banded and the Personal Allowance covers the first slice. A running estimate from your own figures is far more reliable than a flat percentage. Remember payments on account, which can add half of next year's bill to the January payment.
Does the estimate include everything?
It covers income tax and Class 4 National Insurance on your recorded self-employed profit. It cannot know about other income, other reliefs or your full circumstances, so treat it as a planning figure and settle the real position through Self Assessment.
Are the rates different in Scotland?
Scotland sets its own income tax bands and rates on non-savings, non-dividend income, determined by where you are resident rather than where the work is done. National Insurance is unaffected.
Last updated 2026-04-25. Thresholds, rates and allowances are indexed or reset at fiscal events and are deliberately not quoted here; check GOV.UK for current amounts.