How much to put aside for the taxman.
Enter your profit and we'll work out your income tax and National Insurance for the year, what that comes to each month, and when HMRC wants it.
Your first January can be a shock. With a bill over £1,000, HMRC also asks for half of next year's bill in advance, so you pay about one and a half years' tax at once. How the January bill works
CIS deductions came to more than the tax you owe. You claim the difference back through your tax return. Claiming a CIS refund
How the sum works
- Income tax on your profit: nothing on the first £12,570, then 20%, then 40% over the higher-rate band (Scottish bands if you live in Scotland). If you also have a job, the job uses up the allowance first.
- Class 4 National Insurance: 6% of profit between £12,570 and £50,270, and 2% above.
- Any student loan, then minus CIS tax contractors have already taken off.
- The total is your bill for the year; a twelfth of it is the monthly amount.
Payments on account
Self-assessment tax is paid after the tax year ends: the bill for 6 April 2026 to 5 April 2027 is due on 31 January 2028. If that bill is over £1,000, and less than 80% of your tax was already taken at source (through PAYE or CIS), HMRC also asks for two payments towards the next year.
Each one is half of the bill you've just paid. The first is due on the same 31 January as the balance, and the second on 31 July. That's why the first January after you go self-employed is the expensive one: you pay a full year's bill plus half of the next.
If your income drops, you can ask HMRC to reduce your payments on account. If you overpay, the difference comes back to you after you file the next return.
Where to keep the money
The simplest habit is a separate savings pot. Each time a customer pays, move the pence-in-the-pound figure from the calculator into it. Some business accounts can do this for you automatically.