How much Income Tax will I pay as a sole trader?
The tax free allowance for the tax year 2024/25 is £12,570.
Sole traders with income above £100,000 will see a restriction to their personal allowance (by £1 for every £2 that your adjusted net income is above £100,000) and sole traders with income in excess of £125,000 will not have a personal allowance.
Sole traders (and partners in partnerships once the partnership profits have been apportioned) will pay tax at the same rates as employees.
The table shows the tax rates you pay in each band if you have a standard Personal Allowance.
Band | Taxable income 23/24 | Taxable income 24/25 | Tax rate |
---|---|---|---|
Basic rate | £12,570 to £50,270* | £12,570 to £50,270* | 20% |
Higher rate | £50,270 to 125,140* | £50,270 to 125,140* | 40% |
Additional rate | Over £125,140* | Over £125,140* | 45% |
There are different income tax rates for Scottish residents.
Note: Other income that sole traders receive in addition to business profits will need taxing separately. There are different rules for both tax and National Insurance for different income types. It is best to speak to a professional if you have particularly complex tax affairs.
Here are examples showing tax rates at 20% and 40% using the 24/25 tax rates for our calculations.