Self Assessment is the system HM Revenue & Customs uses to collect information needed to calculate tax that has not necessarily been collected automatically through systems such as PAYE. Your final bill depends on what you earned, where the income came from, the expenses and reliefs you can claim, and how much tax you have already paid.
This guide explains how Self Assessment tax is calculated, the current Income Tax bands, how National Insurance can affect self-employed taxpayers, why your first bill may be higher than expected, and how to prepare for the payment deadline.
How is Self Assessment tax calculated?
Your Self Assessment tax bill is calculated using your taxable income for the tax year, after taking account of relevant allowances, deductible expenses and tax reliefs. Different types of income may be taxed differently, and tax already paid during the year is taken into account when determining what remains due.
Your Self Assessment calculation can include income from several sources, such as:
- self-employment
- employment
- property rental
- dividends
- savings and investments
- foreign income
- certain capital gains
- other taxable income
HMRC’s SA302 tax calculation shows the income on which tax is due, relevant allowances and reliefs, the total tax due for the year, and how the amount has been calculated.
This means two people earning the same total amount could still have different tax bills because their circumstances and sources of income are different.
What are the Income Tax rates for 2026/27?
For the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, the standard Personal Allowance is £12,570.
For taxpayers in England, Wales and Northern Ireland, the main Income Tax bands after allowances are:
| Taxable income after allowances | Income Tax rate |
| Up to £37,700 | 20% |
| £37,701 to £125,140 | 40% |
| Over £125,140 | 45% |
The standard Personal Allowance begins to reduce when adjusted net income exceeds £100,000, at a rate of £1 for every £2 above that threshold. Different Income Tax rates and bands apply in Scotland.
Does that mean I pay 40% on all my income if I enter the higher-rate band?
No. Moving into a higher Income Tax band does not normally mean that all of your income is taxed at the higher rate. The higher rate applies to the portion of taxable income falling within that band.
This is an important distinction when estimating a Self Assessment bill.
For example, entering the 40% band does not suddenly convert all of the income previously falling within the basic-rate band into income taxed at 40%.
Your actual calculation can also be affected by your Personal Allowance, other types of income, reliefs and individual circumstances.
Do I pay Self Assessment tax on all my self-employed income?
If you are a sole trader, tax is generally based on your taxable business profit rather than simply the total amount customers paid you. Business profit is broadly calculated by deducting allowable business expenses from business income, subject to the applicable tax rules.
Example:
- Business income: £45,000
- Allowable business expenses: £10,000
- Business profit: £35,000
The starting point for the tax calculation would therefore be the profit rather than the £45,000 turnover.
This is one reason accurate bookkeeping matters. Failing to record legitimate allowable expenses can potentially result in reporting a higher taxable profit than necessary. Claiming costs that are not allowable, however, can result in an incorrect tax return.
Do self-employed people also pay National Insurance?
Yes, depending on their profits. For 2026/27, self-employed people with profits above £12,570 generally pay Class 4 National Insurance at 6% on profits from £12,570 to £50,270 and 2% on profits above £50,270.
For 2026/27, where profits are at least £7,105, Class 2 contributions are generally treated as paid to protect the individual’s National Insurance record, so there is normally no Class 2 payment to make. Those with profits below that level may have the option to pay voluntary Class 2 contributions.
This is important because someone estimating their Self Assessment liability by looking only at Income Tax may underestimate the amount due.
How much tax would I pay on £30,000 of self-employed profit?
A simplified example helps illustrate how the calculation works.
Suppose a sole trader in England has self-employed profit of £30,000 and, purely for illustration, assume they have no other taxable income, are entitled to the full £12,570 Personal Allowance, have no additional reliefs or adjustments, and are using the 2026/27 rates.
£30,000 – £12,570 = £17,430
At a 20% basic Income Tax rate: £17,430 x 20% = £3,486
Class 4 National Insurance at 6%: £17,430 x 6% = £1,045.80
Illustrative combined amount: £4,531.80
This is a simplified example, not an individual tax calculation. Actual liability can differ because of other income, reliefs, allowances, student loan repayments, Capital Gains Tax, High Income Child Benefit Charge and other circumstances.
Why can my first Self Assessment bill be higher than expected?
Your first substantial Self Assessment payment can be higher than the tax due for the year because HMRC may also require a payment on account towards your next tax bill.
Payments on account are advance payments towards the next year’s Self Assessment liability. There are normally two instalments, with each generally equal to half of the relevant previous year’s tax liability.
Example of a payment on account
Suppose the relevant amount of tax owed for the year is £4,000. Your first payment on account could be £2,000 and the second could also be £2,000.
This can mean that the amount payable around the January deadline includes both the balancing amount for the previous tax year and the first payment towards the following tax year.
This is why a first Self Assessment bill can appear significantly larger than expected.
Does everyone have to make payments on account?
No. Payments on account are generally not required if the previous year’s relevant tax liability was less than £1,000, or if more than 80% of the tax owed was collected outside Self Assessment.
For example, someone who has already paid most of their tax through PAYE may not be required to make payments on account.
When are payments on account due?
Where payments on account are required, the normal deadlines are:
- First payment: 31 January
- Second payment: 31 July
Each payment is normally half of the relevant previous year’s amount. If your actual liability for the year is higher than the payments already made, a balancing payment may subsequently be required.
Can I reduce my payments on account if my income has fallen?
Yes. If you reasonably expect your tax liability to be lower than the previous year, you can ask HMRC to reduce your payments on account.
- your business profit has fallen
- you have stopped self-employment
- your income has significantly decreased
- more of your tax will be collected elsewhere
However, you should avoid reducing the payments without a reasonable basis. If the eventual tax bill is higher than anticipated, HMRC can charge interest on the difference between the reduced payments and the amount that should have been paid.
When do I have to pay my Self Assessment tax?
For the 2025/26 tax year, the normal deadline for submitting an online Self Assessment return and paying the tax due is 31 January 2027.
Paper returns normally need to reach HMRC by 31 October 2026. If payments on account apply, the second payment deadline is 31 July.
You do not have to wait until January to submit your return. Filing earlier allows you to find out what you owe sooner, budget for the bill and have more time to arrange payment.
Who needs to complete a Self Assessment tax return?
You may need to submit a Self Assessment return if HMRC cannot collect all of the tax you owe automatically or if your circumstances fall within its filing requirements.
Examples can include:
- a self-employed sole trader with more than £1,000 of income before deducting tax relief
- a partner in a business partnership
- someone required to pay certain Capital Gains Tax
- someone required to pay the High Income Child Benefit Charge outside PAYE
- an off-payroll worker repaying a student or postgraduate loan
- someone with certain untaxed income from property, savings, dividends, foreign income, tips or commission
Your individual circumstances determine whether you need to file.
Does having a PAYE job mean I do not need Self Assessment?
No. Being employed and paying tax through PAYE does not automatically mean that you will never need to submit a Self Assessment return.
You may have other income or circumstances that create a reporting requirement, including self-employment, property income, investments, foreign income or other untaxed activities.
Do landlords pay tax through Self Assessment?
Landlords may need to report taxable property income through Self Assessment, depending on their income and circumstances.
The amount due depends on factors including rental income, allowable property expenses, other income and the tax rules that apply to the individual.
Can CIS subcontractors still have Self Assessment tax to pay?
Yes. CIS deductions made by contractors are advance deductions towards a subcontractor’s tax and National Insurance position. They do not remove the need to calculate the subcontractor’s final tax liability.
The final position depends on the subcontractor’s taxable profit, allowable expenses, CIS deductions already suffered and other relevant income or adjustments. This can result in additional tax being payable or, in some cases, an overpayment being identified.
How can I estimate my Self Assessment tax bill?
A useful starting point is to gather:
1. Your total income for the tax year.
2. Your allowable business expenses.
3. Details of employment income and tax already deducted.
4. Property income and allowable expenses, if applicable.
5. Dividend and savings income.
6. CIS deductions, if applicable.
7. Pension contributions and relevant tax reliefs.
8. Details of other taxable income or gains.
9. Payments on account already made.
From there, the appropriate allowances, tax bands and other charges can be applied.
What are the most common reasons a Self Assessment bill is higher than expected?
- higher taxable profits
- insufficient tax already collected through PAYE
- additional sources of income
- reduced Personal Allowance
- Class 4 National Insurance
- payments on account
- a balancing payment from the previous calculation
- taxable property income
- dividend or investment income
- other charges included in the Self Assessment calculation
If your bill looks unexpectedly high, check the calculation rather than assuming the headline figure represents only Income Tax for the year.
What should I do if I cannot pay my Self Assessment bill?
Do not ignore the payment simply because you cannot afford to pay the full amount immediately.
Filing the return early can give you more time to understand the liability and plan for payment. Your available options depend on your circumstances, so action should be taken as early as possible rather than waiting until after the deadline.
Frequently Asked Questions About Self Assessment Tax
Is Self Assessment a separate tax?
No. Self Assessment is a system for reporting information and calculating tax liabilities. It is not itself a separate tax with its own single tax rate. A Self Assessment calculation can include Income Tax and, depending on the taxpayer’s circumstances, other liabilities such as Class 4 National Insurance.
Is there a difference between a tax return and Self Assessment?
Yes. Self Assessment is HMRC’s system for taxpayers to report relevant income, gains and other information and establish their tax liability. A Self Assessment tax return is the return submitted as part of that process.
Will HMRC tell me how much Self Assessment tax I owe?
Yes. After your return is filed, your tax calculation and Self Assessment statement can show the amount due. If you file online, you can also view the calculation through your HMRC online account.
Can I submit my Self Assessment early?
Yes. You can submit your return after the relevant tax year has ended rather than waiting until the January deadline. Filing early can help you understand your bill sooner and give you more time to budget for payment.
Do I have to pay my whole Self Assessment bill at once?
Your Self Assessment statement will show what is due and when. If payments on account apply, these are normally split between 31 January and 31 July. The balancing payment for the previous year is normally due in January.
Get Help With Your Self Assessment Tax Return
Understanding how much tax you owe can become more complicated when you have multiple sources of income, self-employed profits, CIS deductions, property income, expenses, payments on account or other tax considerations.
M&B Tax Services can help you prepare your Self Assessment tax return, review the figures that affect your liability, identify relevant allowable expenses and understand how much you need to pay and when.
Preparing the return earlier can also give you more time to understand the amount due instead of discovering your tax liability shortly before the payment deadline.Need help with your Self Assessment? Contact M&B Tax Services to discuss your tax return and individual circumstances.
Joanna Bruty
- On this page