Freelance income tax in the UK for 2026/27: the rates, the National Insurance, the allowances, and exactly how much of your income you keep as a freelancer.
If you have gone freelance, or you are about to, the tax question hangs over everything: how much of what I invoice do I actually get to keep? Freelance income tax in the UK is genuinely simpler than it looks once you see the shape of it, but nobody hands you a clear map when you start out.
So here is the map. This is how freelance income tax works for the 2026/27 tax year, what you pay, what you keep, and the handful of things that trip up almost every new freelancer.
You pay income tax and National Insurance on your profit, not your turnover, at the same tax rates as an employed person, but you work it out yourself through Self Assessment instead of it being taken automatically from a payslip.
That word “profit” is the whole game. Freelance income tax is charged on what is left after your allowable business expenses come off your income. Turnover is what you invoice. Profit is what you keep before tax. You are only taxed on the profit.
Let me walk through the layers, because freelance income tax is really three separate charges stacked on the same profit.
Your profit gets added to any other income you have and taxed in bands. For 2026/27 the bands are:
These are the same rates an employee pays. Being freelance does not put you on a worse scale. It just means you calculate and pay it yourself.
On top of income tax, the self-employed pay Class 4 National Insurance on their profit. For 2026/27, Class 4 is charged at 6% on profit between £12,570 and £50,270, then 2% on profit above £50,270. This is the freelance equivalent of the National Insurance an employee has taken from their wages, and it is the layer new freelancers most often forget to budget for.
There is also Class 2 National Insurance, historically a flat weekly charge that sat alongside Class 4. The rules changed so that most self-employed people with profits above the relevant threshold no longer pay a separate Class 2 charge, while still building up their National Insurance record as if they had. If your profits are low, you can usually choose to pay Class 2 voluntarily to keep your State Pension qualifying years intact, which is often well worth it. Because the exact rate and thresholds are reviewed each year, check the current Class 2 position on gov.uk when you file, rather than assuming last year’s figures.
The key thing to hold onto: freelance income tax is income tax plus Class 4 National Insurance on your profit, with Class 2 mainly relevant now for protecting your State Pension record.
Numbers make this concrete. Say you are a freelance designer with no other job. Over the 2026/27 tax year you invoice £45,000 and you have £5,000 of allowable expenses (software, a laptop, your accountant, a share of your home office).
Now the tax on that £40,000 profit:
So your total freelance income tax and National Insurance is roughly £7,132 on £40,000 of profit. You keep about £32,868 before any pension contributions, and before payments on account are factored into the timing. That is an effective rate of around 18% on your profit, which surprises people who assumed freelancing meant losing half of everything.
The lesson from the example is simple. Track your expenses properly, because every £1,000 of genuine allowable expense saves you £260 in tax and NI at the basic rate. And set aside a rough 20% of your profit as you go, so the bill in January never blindsides you.
Because profit is what you are taxed on, allowable expenses are the most valuable thing you can get right. The rule is that the cost must be “wholly and exclusively” for your business. Common ones for freelancers:
You cannot claim personal spending, and you cannot claim the same cost twice. Keep receipts and a simple record as you go, not in a panic in January. Good expense tracking is the single biggest lever on your freelance income tax bill.
Plenty of people freelance on the side of employed work, and the interaction confuses everyone at first.
Your job is taxed through PAYE, with your personal allowance usually applied there. Your freelance profit is then taxed through Self Assessment on top. HMRC stacks the two: your employment income uses your personal allowance and part of the basic-rate band, and your freelance profit is taxed starting from wherever your employment income left off.
So if your job already pays £45,000, most of your basic-rate band is used up, and freelance profit could be taxed at 40% sooner than you expect. This is not a penalty, it is just the bands filling up in order. The practical takeaway is to set aside a higher percentage of side-hustle profit if your main job already pushes you towards the higher-rate threshold.
There is one gentle on-ramp worth knowing. The £1,000 trading allowance lets you earn up to £1,000 of freelance income a year without paying tax on it or even registering for Self Assessment. Cross that, and you are in the system.
Freelance income tax is not taken as you earn. You pay it after the tax year through Self Assessment, and the timing catches people out.
For a given tax year, the balancing payment and your first payment on account are both due by 31 January after the year ends. A second payment on account follows on 31 July. Payments on account are advance instalments towards the next year’s bill, each normally half of your last bill. If your income is uneven, you may be able to lower them, which we cover in Self Assessment payment on account explained and in the guide to the 31 July second payment.
Because you pay in arrears, the discipline that keeps freelancers sane is putting money aside every time you get paid. A separate savings pot holding roughly 20% to 30% of each payment, depending on your band, means the January bill is money you already have, not a shock.
The core of freelance income tax is stable for 2026/27. The personal allowance is frozen at £12,570 and the higher-rate threshold at £50,270, both held until at least April 2028. The income tax bands and rates are unchanged. Class 4 National Insurance remains 6% and 2%.
The freeze on thresholds is the quiet story for freelancers. As your rates and day rates rise with inflation, the bands do not move with you, so a growing freelance income drifts into higher tax bands over time. That is fiscal drag, and it makes pension contributions and clean expense tracking steadily more valuable each year.
What did not change: profit, not turnover, is still what you are taxed on. Expenses still reduce the bill. And Self Assessment is still the mechanism, with the same January and July dates. Get those basics right and freelance income tax stops being frightening.
If you want to see exactly what your freelance income leaves you after tax, National Insurance, and payments on account, the NetPay app runs the full calculation for you. Free to download.
See your real take-home pay in seconds
NetPay does this maths for every shift, invoice and payslip, automatically.
Download the app now
Freelancers pay income tax on their profit at the same rates as everyone else: 0% up to £12,570, 20% up to £50,270, 40% up to £125,140, and 45% above that. On top of that they pay Class 4 National Insurance at 6% between £12,570 and £50,270 and 2% above, plus a flat-rate Class 2 charge in some cases. Tax is on profit, not turnover, so allowable expenses reduce the bill.
Your employment is taxed through PAYE and your freelance profit is taxed through Self Assessment. HMRC adds the two together to work out your total income and which tax bands you fall into. Your personal allowance is usually used up by the job first, so freelance profit is often taxed from the basic rate up.
You can earn up to £1,000 of freelance income a year tax-free under the trading allowance without even registering. Beyond that, you have your normal £12,570 personal allowance, but if your total income from all sources is already above that, freelance profit is taxed from the first pound.
You pay through Self Assessment. The balancing payment for a tax year and the first payment on account are both due by 31 January after the tax year ends, with a second payment on account due 31 July. So freelance tax is paid after you earn it, which is why setting money aside as you go matters.
Want to see your actual take-home pay?
NetPay UK works out your real net pay after tax, NI, pension and salary sacrifice, for hourly, shift and variable-income workers. Free to download.
Download the app now
A note on financial advice: NetPay UK calculates take-home pay based on official HMRC tax rules. This article reflects rules in force at the time of publication (7 July 2026). Tax rules change. For complex situations, consult a qualified UK accountant or visit gov.uk/income-tax.
