How much of every invoice should I put aside for tax?

The short answer: In 2026/27, a sole trader in England, Wales or Northern Ireland with £30,000 profit pays about 15% of it in Income Tax and Class 4 National Insurance. At £50,000 it's about 19.5%, and at £70,000 about 26%. The Autumn Budget kept these rates and bands for 2027/28, so the same shares still work next year.

A client pays your £2,000 invoice. Lovely. But before you spend it in your head, some of that money may already have a job: covering business costs or paying HMRC. Here's how to work out your own share, rather than borrowing someone else's.

How much should I set aside for tax when I'm self-employed?

Start with your expected profit, not one fixed percentage of every invoice. Your Income Tax and Class 4 National Insurance (NI) depend on your taxable profit: what's left after allowable expenses.

In 2026/27, the standard Personal Allowance is £12,570. That's the income you don't pay Income Tax on. Class 4 NI starts at the same £12,570. Above that, the share you owe climbs as your profit grows.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

As a rough guide, here's the share of profit that goes on Income Tax and Class 4 NI:

• £20,000 profit: about 9.7%

• £30,000 profit: about 15.1%

• £50,000 profit: about 19.5%

• £70,000 profit: about 25.8%

These are made-up profits, worked through further down. Treat them as a starting point. Your own figure depends on your other income, where you live and the dates you pay.

Should I base my tax reserve on turnover or profit?

Base it on profit. HMRC's own example: turnover of £40,000 with £10,000 of allowable expenses leaves £30,000 of taxable profit. Tax is worked out on the £30,000.

Moving money from your business account to your personal account doesn't cut that profit. Allowable expenses don't include money taken for personal use.

Your accounting method changes when income counts. Cash basis is the standard method for sole traders. It counts income when you receive it and costs when you pay them, so you don't pay tax on invoices still unpaid.

What about VAT? You must register once your taxable turnover goes over £90,000 in 12 months. If you're registered, keep the money you set aside for VAT separate. It isn't part of your profit, and it isn't spare money.

Did the Autumn Budget change self-employed tax rates?

No. The Budget on 28 October 2026 left the main Income Tax rates and bands, and Class 4 NI, exactly as they are for 2027/28. That's set out in the Budget's table of rates and allowances.

Two smaller things do change from 6 April 2027:

• The trading allowance goes up from £1,000 to £3,000, and so does the income you can earn before you must report it on a tax return.

• The Small Profits Threshold for Class 2 rises to £7,355, and voluntary Class 2 goes up to £3.80 a week.

The table covers trading profits in England, Wales and Northern Ireland, with a full Personal Allowance. Scotland has its own Income Tax bands. The 2027/28 figures still need the usual laws passed, and most NI limits stay at 2026/27 levels until 2030/31.

For the full list of measures, see what the Autumn Budget 2026 changed for the self-employed.

How much tax will I pay on £30,000, £50,000 or £70,000 profit?

Different slices of profit are taxed at different rates. You don't pay 26% on every pound. Income Tax is 20% on the first £37,700 above your allowance, then 40%. Class 4 NI is 6% up to £50,270, then 2%.

If your income goes over £100,000, your Personal Allowance shrinks by £1 for every £2 above it, and is gone at £125,140.

These sums are rounded to the nearest pound and work the same for 2026/27 and 2027/28. They assume:

• a sole trader below State Pension age in England, Wales or Northern Ireland

• a full Personal Allowance and no other income

• nothing paid into a pension, no student loan and no other adjustments

They leave out payments on account and VAT. So 40% Income Tax starts once your profit tops £50,270, if this is your only income.

Example: turning £40,000 profit into a share of every invoice

Say you bill £50,000 in a year and have £10,000 of costs. These are made-up numbers. That leaves £40,000 of profit.

1. Income Tax: £27,430 above the allowance at 20% is £5,486.

2. Class 4 NI: the same £27,430 at 6% is £1,645.80.

3. Together: £7,131.80. That's about 17.8% of profit, or 14.3% of the £50,000 you bill.

Those two percentages start from different figures, so use the right one. If you move money across every time an invoice is paid, use the share of what you bill. If you set money aside after paying your costs, use the share of profit.

A routine makes this easier. Estimate your income and costs for the year, work out the likely bill with the sole trader tax planner, and compare it with what you've saved. Check again when a big project lands or work slows down. A small extra margin can help, though no buffer guarantees the bill is covered.

Why can January's bill be bigger than I expected?

Because of payments on account. These are advance payments towards next year's bill. Each one is half of last year's tax, due on 31 January and 31 July.

You don't make them if last year's bill was under £1,000, or you paid more than 80% of your tax at source. Class 4 NI is included in them.

Here's a made-up first year on £30,000 profit:

• Your bill for the year is £4,532.

• By 31 January, you pay that £4,532 plus a first payment on account of £2,266. That's £6,798.

• By 31 July, you pay a second £2,266.

HMRC's own example works the same way: a £3,000 first bill means £4,500 is due in January. So plan around the dates, not just the yearly total. The next deadline is 31 January 2027.

Is the way I pay changing?

Yes, but not until April 2029. From then, people who make payments on account will make smaller, more regular payments through the year.

These will be automated by default, for example by Direct Debit. If you also have enough income taxed through PAYE, for example from a job, you can choose to pay that way instead. HMRC plans tools from 2028 to help you estimate your bill and pay ahead. The government is still working out the detailed design.

You don't have to wait, though. You can already set up weekly or monthly Direct Debits towards your next bill through a Budget Payment Plan, and pause them for up to 6 months.

Does the £3,000 trading allowance change anything?

Only if your trading income is small. In 2026/27, the trading allowance covers up to £1,000 of gross trading income. From 6 April 2027 that becomes £3,000, and you won't need to report trading income of £3,000 or less.

Before you rely on it, check three things:

• It replaces your allowable expenses. You can't claim both.

• You can't use it on income from your own company, your partnership or your employer.

• You may still choose to file, for example to claim a loss or pay voluntary Class 2.

Say you sell crafts on the side and make £2,500 in 2027/28 (a made-up figure). Under the new limit, you wouldn't usually need to report it. If your costs are bigger than £3,000, though, claiming them may work out better.

What about my National Insurance record in a quiet year?

If your profit is £7,105 or more in 2026/27, Class 2 is treated as paid, which protects your NI record. Below that, you can choose to pay voluntary Class 2 at £3.65 a week.

From April 2027, the threshold rises to £7,355 and voluntary Class 2 to £3.80 a week. Before paying, it's worth checking how your NI record builds your State Pension.

What can I do now?

1. Estimate this year's profit, not your turnover.

2. Use the table above to find a rough share, then work out your own figure.

3. Put the dates in your diary: 31 January and 31 July.

4. Keep VAT money apart if you're registered.

5. If small side income is all you have, check whether the £3,000 trading allowance applies from April 2027.

Still got questions?

Do self-employed people pay 20% tax? On some of their profit. In 2026/27, Income Tax is 20% on the first £37,700 above the £12,570 allowance. Class 4 NI adds 6% on profit between £12,570 and £50,270.

How much tax will I pay on £20,000 self-employed profit? About £1,932 in 2026/27: £1,486 Income Tax and £446 Class 4 NI. That assumes no other income and a full allowance.

When do I start paying 40% tax? Once your income goes over £50,270, with a full Personal Allowance. Class 4 NI drops to 2% at the same point.

Will tax thresholds go up in 2027? Not the main ones. The Personal Allowance, Income Tax bands and Class 4 limits stay the same in 2027/28. The trading allowance and Small Profits Threshold do go up.

Is a fixed 20% or 30% a good rule? It can be a handy start, but it's not tailored to you. Your own share depends on your profit, other income and payment dates.

Do I have to wait until 2029 to pay monthly? No. You can set up weekly or monthly payments with HMRC now through a Budget Payment Plan.