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Self-employed income tax

Learn how self-employed income tax works, how to file your tax return, and what supplementary tax return sections and forms you might need to fill out

In this article
What is self-employed income tax? Video: how do I pay tax as a self-employed person? How do you file a tax return as a self-employed person? Which self-employment supplement should I choose?
What are the self-employed income tax rates for 2022-23? National Insurance for the self-employed Submit your 2021-22 tax return with Which?

What is self-employed income tax?

If you're self-employed, you'll pay income tax in a different way to employed workers, as it's charged on your profits rather than your gross income via a self-assessment tax return.

To work out the correct figure, you need to deduct your business expenses from your income – this includes both business expenses and larger capital allowances. You can also deduct any losses carried over from previous years. 

The resulting amount of profit is what you'll be taxed on.

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

Video: how do I pay tax as a self-employed person?

In our short video below, we explain who needs to pay income tax and how to pay the right amount on your self-employed earnings.

How do you file a tax return as a self-employed person?

You can either submit your tax return online, fill out a paper tax return or use commercial software. HMRC has a list of commercial software providers you can choose from.

When you first decide to be self-employed, you should register your business with HMRC as soon as possible. 

If you've never submitted a self-assessment tax return before, you'll be assigned a Unique Taxpayer Reference (UTR) number and you'll also be registered for Class 2 National Insurance contributions (you'll pay these automatically if your income is over a certain amount, otherwise you can choose to pay them voluntarily).

  • Submit your return: to tot up your bill and send your tax return direct to HMRC, use the Which? tax calculator.

Which self-employment supplement should I choose?

It's important to make sure you declare all relevant income on your tax return; most income sources are given different sections if you file online.

If you file a paper tax return, you'll need to fill out supplementary pages. 

The main self-assessment section taxpayers need to fill out is SA100 and it's the first section you're sent to if you file your return online. 

If you're self-employed, you'll also need to fill out the section SA103S (the short version) or SA103F (the full version).

You can fill in the short one if your turnover for the 2021-22 tax year was £85,000 or less and you have no complications, such as a change of accounting date.

However, you can't use the short form if your accounting period – the dates you choose to prepare your accounts for each year – isn't the same as your basis period (ie your business year, which is the period HMRC assesses your tax on). 

This means many people won't be able to use the short supplement in their first year of trading. 

It's up to you to make sure you use the right supplement, so if you opt for the short form make sure there are no complications that could invalidate it.

  • Useful link: check HMRC's notes to help you fill in the supplement forms – the short form and the full form.

What if I received a self-employed income support (SEISS) grant?

If you received any grants as part of the government's self-employed income support scheme, you'll need to declare these on your tax returns as they are taxable.

Grants 1, 2 and 3 should already have been included on your 2020-21 tax return. 

Grants 4 and 5 should be included in 2021-22 tax returns.

The correct place to include this income is the section that specifically refers to SEISS grants, on a page called ‘Other tax adjustments for your business trading name’.

What if I'm a sole trader with a limited company or partnership?

In addition to the supplements already covered, if you're in partnership, you need the partnership supplement (SA104), which also has a full and a short version.

If you're the director of a limited company, you will count as an employee of the business for tax purposes, and will therefore need to fill out the employment supplement (SA102).

What are the self-employed income tax rates for 2022-23?

When it comes to paying income tax, there aren't any differences in the tax rates you pay compared with employees.

You can use our income tax calculator to find out how much you'll pay.

In 2022-23, self-employed workers and employees pay:

  • 0% on the first £12,570 you earn.
  • 20% on income between £12,571 and £50,270.
  • 40% on income between £50,271 and £150,000.
  • 45% on income over £150,000. 

This is unchanged from 2021-22.

Tax bands, rates and allowances are different in Scotland – see our dedicated guide to find out what you'll pay. 

 

National Insurance for the self-employed

The story is different when it comes to National Insurance contributions. Self-employed people pay a lower rate of National Insurance compared with employees.

The self-employed have to make Class 2 and potentially Class 4 contributions, depending on how much they earn.

In 2022-23, Class 1 and Class 4 National Insurance rates increased by 1.25 percentage points due to a new health and social care levy. 

In 2022-23 you pay Class 2 contributions if you earn more than £11,908, charged at £3.15 a week.

Class 4 contributions will come in on profits above £9,880 at 10.25% between 6 April and 5 July; from 6 July onwards the threshold will rise to £12,570. You'll pay 3.25% on earnings above £50,270.

In 2021-22 you owed Class 2 contributions if you earned more than £6,515, which cost £3.05 a week.

Class 4 contributions were payable at 9% on profits above £9,568, falling to 2% on earnings above £50,270. 

Read our guide to find out all about self-employed National Insurance.

Submit your 2021-22 tax return with Which?

File your 2021-22 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.

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