Understanding UK tax rates is essential if you’re self-employed. Knowing what you owe, when to pay it and which allowances apply can make all the difference in managing your finances effectively. Whether you’re a sole trader, freelancer or running a growing business, being clear on the current thresholds helps you plan ahead and avoid unnecessary stress.
At Accounts & Returns, we support self-employed individuals and small businesses across the UK. With multiple branches nationwide, our expert accountants offer clear, practical advice to help you navigate the complexities of tax, so you can focus on growing your business.
UK tax rates for Income Tax and the Personal Allowance
Income tax is one of the most common areas of confusion. The way UK tax rates are structured means you only pay the relevant percentage on the portion of income that falls into each band. Think of it as filling buckets: one for the tax-free Personal Allowance, then further buckets for basic, higher and additional rates.
For the 2025/26 tax year, the Personal Allowance remains at £12,570. That means you won’t pay any income tax until your profits exceed this threshold. From there, income between £12,571 and £50,270 falls under the basic rate band at 20%. Earnings above £50,270 move into the higher rate at 40% and income over £125,140 is taxed at 45%.
Keeping track of where your earnings fall within these bands is crucial and this is where we can help. Our accountants at Accounts & Returns ensure you’re claiming all available reliefs and allowances, reducing the amount you owe.
National Insurance Contributions
If you’re self-employed, UK tax rates don’t just cover income tax – National Insurance Contributions (NICs) also apply. For 2025/26, Class 2 NICs have been abolished, meaning most self-employed workers will instead pay Class 4 contributions on profits above £12,570.
The rates are:
- 6% on profits between £12,570 and £50,270
- 2% on profits over £50,270
These contributions go towards your state pension and benefits. With rules shifting frequently, it’s easy to miss changes that affect your liability. At Accounts & Returns, our experts make sure you’re up to date, compliant and paying no more than you need to.
VAT for the self-employed
Depending on your turnover, VAT could also come into play. If your taxable turnover exceeds £90,000 in a 12-month period, you must register for VAT. Current UK tax rates for VAT remain at 20% (standard rate), 5% (reduced rate) and 0% (zero rate).
VAT registration adds extra responsibility, from quarterly submissions to staying compliant with Making Tax Digital (MTD). Our team can take this stress away, handling your VAT returns accurately and on time. With our support, you’ll avoid penalties and stay focused on running your business.
Why choose Accounts & Returns?
Tax doesn’t have to be overwhelming. With clear advice and expert support, you can take control of your finances and plan with confidence. At Accounts & Returns, we provide tailored tax services for self-employed individuals, helping with everything from tax returns and VAT submissions to long-term planning.
With offices across the UK, we combine local knowledge with national expertise, ensuring you always have accountants you can rely on nearby. Our goal is to simplify tax and keep you compliant, whilst also identifying opportunities to save money.
Final thoughts
Staying on top of UK tax rates is vital for every self-employed person. From understanding income tax bands to managing National Insurance and VAT, knowing the rules helps you make smarter financial decisions – but you don’t have to manage it alone.
Let Accounts & Returns guide you through the process, minimise your liabilities and keep your business running smoothly. Contact us today to find out how we can support your tax needs across any of our branches nationwide.
