Income tax

Self-employed income tax

By Ian Robinson

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Self-employed income tax

Learn how to calculate your income tax bill, and what tax returns you'll need to fill out if you're self-employed.

If you're self-employed, you are responsible for declaring and paying income tax on the profits from your business.

This guide talks you through the basics of what you need to do to calculate how much income tax you pay. 

Self-employed income tax

Self-employed people pay income tax on their profits, rather than their gross income. To work out the correct figure, you need to deduct business expenses from your business income.

You can also claim capital allowances and deduct any losses carried over from previous years. The resulting amount is your taxable income.

Find out more: Self-employed capital allowances - find out what you can claim as tax-deductible.

Useful link: HMRC's guide to self employment - for those starting a business and HMRC's self-employment ready reckoner to check your likely tax and National Insurance bill.

Self-employed tax return 

To work out whether you must pay income tax, you need to fill in the self-employment supplement (SA103) as well as the main tax return. 

Usually this is sent to you automatically once you've registered as self-employed.

If you have registered but don’t receive one, you can download it from the HMRC website or get a copy by calling the HMRC orderline (0845 900 0404).

Tax return supplements

There are now two tax return supplements – a short one and a full one.

You can fill in the short one if your turnover for 2015/16 was £77,000 or less, and no complications, such as a change of accounting date, apply.

However, you can't use the short one if your accounting period is not the same as your basis period (ie your business year), so you may not be able to use it in the first year. It's up to you to make sure you get the right supplement.

Partnerships and limited companies

The supplement and the advice in this section apply to people who are sole traders. If you are in partnership, you need the partnership supplement. 

If you run your own limited company, you are an employee of the business and need the employment supplement.

  • Last updated: April 2016
  • Updated by: Ian Robinson