UK Self Assessment Tax Calculator (2025/26)

Worked example

Why your January bill can be 150% of your tax

The single biggest shock for new sole traders is that the amount HMRC asks for on 31 January is usually far more than the tax they actually owe for the year. That is because of payments on account, a system that makes you pay towards next year's bill at the same time as settling this year's.

Once your Self Assessment liability (income tax plus Class 4 National Insurance) is more than GBP 1,000, and less than 80% of your tax was collected at source, HMRC requires two payments on account. Each one is 50% of your previous year's bill. The first is due on 31 January alongside your balancing payment for the year just ended, and the second on 31 July.

So in the first January that payments on account kick in, you settle 100% of the year that has finished and hand over a 50% instalment towards the year ahead. That is where the 150% figure comes from. In our worked example, a GBP 13,888.60 tax bill turns into GBP 20,832.90 payable on 31 January, then a further GBP 6,944.30 on 31 July.

The good news is that this only feels brutal the first time. In later years the two payments on account you have already made are credited against the new bill, so you are effectively always one instalment ahead. The trap is treating your first payment on account as a one-off: it is not, it is a permanent shift in when your tax is due. Budgeting for roughly 150% of your expected tax in that first January is the safest approach, and this calculator shows you the exact figure so there are no surprises.

Payments on account are estimates based on last year. If your income has genuinely fallen, you can apply to reduce them (covered below). If it has risen, you will owe a top-up balancing payment the following January. Either way, the money set aside should be kept in a separate account, because HMRC charges interest the moment a payment is late.

How income tax and Class 4 NI stack on your profit

As a sole trader you pay two charges on the same profit, and they use different thresholds, so it pays to understand how they interact.

Income tax is charged on your total taxable income, which includes your profit plus any other Self Assessment income such as rent or untaxed savings. The first GBP 12,570 is covered by the Personal Allowance and is tax free. The next GBP 37,700 is taxed at the basic rate of 20% (taking you up to GBP 50,270). Income above that is taxed at 40% up to GBP 125,140, and at 45% beyond. If your income tops GBP 100,000 the Personal Allowance is clawed back by GBP 1 for every GBP 2 over that figure, disappearing entirely at GBP 125,140 and creating an effective 60% marginal rate in that band.

Class 4 National Insurance is charged on your business profit only, not on rental or savings income. For 2025/26 you pay 6% on profit between GBP 12,570 and GBP 50,270, then 2% on any profit above GBP 50,270. Because the 2% rate never switches off, high earners keep paying a little NI on every extra pound.

The two systems share the same GBP 12,570 starting point and the same GBP 50,270 upper threshold, which is why a profit sitting just below GBP 50,270 is taxed at a combined 26% at the margin (20% income tax plus 6% Class 4), while a profit just above it jumps to a combined 42% (40% plus 2%). That kink at GBP 50,270 is the point where crossing into higher-rate tax hurts most.

Class 2 National Insurance largely fell away from 2024/25. If your profit is at or above the Small Profits Threshold of GBP 6,845 you are treated as having paid Class 2 and owe nothing, while still building entitlement to the State Pension. Only those with profits below GBP 6,845 might choose to pay Class 2 voluntarily at GBP 3.50 a week. Class 2 is never part of a payment on account.

Note that these income tax bands apply to England, Wales and Northern Ireland. Scottish taxpayers have their own bands and rates, though Class 4 NI is identical UK-wide.

Reducing payments on account and when they do not apply

Payments on account assume your income next year will match this year. When that assumption is wrong, you have options, but using them carelessly can cost you.

First, check whether payments on account apply at all. They are not required if either your Self Assessment bill for the year was under GBP 1,000, or if more than 80% of your tax was already deducted at source (for example through PAYE on a salary alongside your self-employment). Many people with a small side business and a main job never make payments on account for this reason.

If you do fall into the system but expect your profit to drop, you can make a claim to reduce payments on account through your online Self Assessment account or on form SA303. You tell HMRC the lower figure you believe your total bill will be, and each instalment is recalculated to 50% of that estimate. This is genuinely useful if you have lost a major client, gone part time, or made a large pension contribution that cuts your tax.

The risk is over-reducing. If you shrink your payments on account below what you actually end up owing, HMRC charges interest on the shortfall, backdated to the original due dates, and in cases of a careless or deliberately low claim can add a penalty. So reduce only to a figure you are confident about, and keep evidence of why you expected lower income.

Some traders deliberately leave payments on account in place even when they could reduce them, using the July and January deadlines as a forced savings plan. Others prefer to hold the cash and reduce where legitimate. There is no single right answer, but whatever you choose, model it first. This calculator shows both your true liability and the payment on account HMRC will demand, so you can see the gap and decide how much to set aside.

Remember too that Capital Gains Tax, student loan repayments and Class 2 NI sit outside payments on account. They are added to the balancing payment each January, so a year with a property or share disposal can produce a January bill noticeably larger than your payments on account suggested.

Self Assessment deadlines and penalties for 2025/26

The 2025/26 tax year runs from 6 April 2025 to 5 April 2026, and its deadlines fall in the following calendar year. Missing them triggers automatic penalties even if you owe nothing, so it is worth marking the dates now.

Key dates for the 2025/26 return:

• 5 October 2026 - deadline to register for Self Assessment if this is your first year of self-employment.
• 31 October 2026 - deadline for a paper tax return.
• 31 January 2027 - deadline to file online and to pay your balancing payment plus your first payment on account.
• 31 July 2027 - second payment on account due.

Late filing penalties start at a fixed GBP 100 the day after the online deadline, even if no tax is due. After three months, daily penalties of GBP 10 apply for up to 90 days (a further GBP 900). At six and twelve months late, extra penalties of the greater of GBP 300 or 5% of the tax owed are added at each stage, so a persistently late return can attract well over GBP 1,600 in penalties before the tax itself.

Late payment penalties are separate. Tax still unpaid 30 days after the 31 January deadline attracts a 5% surcharge, with further 5% charges at six and twelve months. On top of that, interest runs daily on any overdue amount from the due date until you pay, at HMRC's published late payment rate, which is linked to the Bank of England base rate plus a margin.

If you cannot pay in full, HMRC's online Time to Pay arrangement lets many taxpayers spread a Self Assessment bill over monthly instalments, provided the return is filed and the debt is within the published limit. Interest still applies, but setting up a plan before the deadline usually avoids the late payment penalties. The practical takeaway: file early even if you cannot pay, because the filing penalty and the payment penalty are charged independently, and filing on time removes half the problem straight away.

Frequently asked questions