Self-employed tax calculator

Using income tax rates applicable to the chosen tax year

You can also use this calculator to see how much tax you pay each year if you are employed or receive income from bank interest or dividends. Just leave the trading profit and property income sections blank, but fill in your annual salary, enter your tax free allowance (the most common value is input automatically) together with any income you receive from interest or dividends. The tax you pay on your salary will be shown as "PAYE tax deducted at source "while any extra tax payable on your interest or dividends will be shown as "INCOME PAYABLE UNDER SELF ASSESSMENT "

NOTES ON THE USE OF THIS CALCULATOR

Since April 2017 Scotland has set its own tax rates and allowances. Do not use this calculator if the trader's main residence is in Scotland.

This calculator assumes that the trader is self-employed for the whole of the tax year. Class 2 National Insurance contributions are calculated for one complete year. Where a trader does not work for the whole tax year (as may happen in the first tax year of self-employment) then the Class 2 National Insurance value will be too high.

The correct figure for capital allowances must be entered against trading profit otherwise the calculated tax liability will be incorrect.

The correct amount of trading loss or property loss brought forward from a previous tax year must be entered in the designated boxes.

PERSONAL TAX FREE ALLOWANCE: Traders whose earnings are high may have a lower Personal Allowance. If what is known as the 'adjusted net income' for the year (i.e. taxable trading profit + employment income + taxable property income + gross savings interest + gross dividends received less gross contributions to Gift Aid and Personal Pension Plans(PPP)) exceeds £100,000 then the personal tax-free allowance will be reduced. For every £2 adjusted net income in excess of £100,000 the amount of personal tax-free allowance reduces by £1. If the amount of Personal Allowance entered for the calculation does not reflect this reduction then the calculated tax will be too low. Click the check box below the personal allowance line to automatically reduce the Personal Allowance for incomes above £100,000.

Where personal allowances are reduced by the calculator for adjusted net incomes over £100,000, this reduction will not apply to the PAYE tax calculation. PAYE tax deducted at source from employment income is calculated on the basis of the original personal allowance entered by the user. It is assumed that reductions of personal allowance are done retrospectively after the end of the tax year. If this assumption is incorrect then this calculator will underestimate the PAYE tax paid and overestimate the balance of tax owing payable under self-assessment. To correct this, first work out what your tax allowance will be for the year, work out the personal tax free allowance remaining, then enter the adjusted personal tax allowance in the box marked " Less Personal Allowance for this year " and leave the check box for automatically reducing the personal allowance unchecked.

Before April 2016 an enhanced Personal Allowance was available to traders aged over 65 years but this reduced towards the standard Personal Allowance where adjusted net income exceeded £24,000. If this calculator is used for a trader aged over 65 years for one of the tax years 2015/16 or earlier then the adjusted Personal Allowance will have to be worked out separately and entered in the Personal Allowance box. However since April 2016 everyone has received the same basic personal tax free allowance regardless of age.

The amount of personal allowance available to an individual in a tax year is indicated by the tax code assigned to that person. If the tax code begins with the letter 'K' then taxable income will exceed actual income: there is, in effect, a negative personal allowance. In this case a negative number must be entered in the Personal Allowance box, otherwise the calculated tax due will be underestimated.

LOW INCOME PROPERTY OR TRADING ALLOWANCES: Starting in April 2017 if your gross income from renting property or gross income from trading is less than £1,000 then this income may be taken tax free. If you have a rental business and also a trading business you can claim two £1,000 allowances, one for your rental income and the other for your self-employed trading income. You do not have to declare this income on your tax return. By gross income is meant the sum of your receipts from customers before any expenses or allowances are deducted. If your income from either of these sources exceeds the threshold of £1,000 then it must be included in your tax return, but you have a choice in how you calculate your net profit: you may either deduct a fixed allowance of £1,000 from your gross income, or else work out your net profit in the standard way by totalling up your allowable expenses and deducting the total from your gross income. If you have a property rental business or a trade which brought in less than £1,000 in gross annual income, and you are calculating your tax bill for the 2017/18 tax year or later, then you can leave the property income or trading income sections of this calculator blank.

RENTING A ROOM IN YOUR OWN HOUSE: If you are letting a room in your own home under the 'Rent a Room' scheme then until the 2016/17 tax year the first £4,250 of rent was tax free, unless you opted to have the rental income taxed under the normal regime.  For the purposes of this allowance 'rent' includes all income derived from letting the room including payments received for providing meals or other services. In the 2016/17 tax year this tax free allowance increased to £7,500 per year and remains at this amount for 2018/19 tax year.  However no Wear and Tear Allowance nor other expenses may be claimed against rent if you claim this tax free allowance: all rent in excess of the tax free allowance is treated as taxable income. In this case simply enter the figure of rent less the tax free allowance in the main Property Income box. Alternatively enter the total amount of rent in the main Property Income box and enter the applicable tax free allowance in the box below as an allowable expense. If you rent a room in your home and the income exceeds this allowance you can opt to apply this allowance and pay tax only on amount by which you rental income exceeds this allowance. You cannot claim any deductions for expenses. Alternatively you can calculate your taxable income in the standard way adding up all the income and deducting associated expenses.

WEAR AND TEAR ALLOWANCE: Wear and Tear Allowance only applies to furnished let properties and only for 2015/16 tax years and earlier. Starting in April 2016 landlords must calculate the actual replacement value of old discarded furnishings in let properties. Details of allowable expenses available from April 2016 are found here. The value of Wear and Tear allowance against property income is calculated from the figure in the main Property Income box. This value should not include any rent to cover expenses such as council tax or utilities that are normally paid by the tenant rather than the landlord. If such rent is included in the main box figure, then the value of Wear and Tear Allowance calculated will be too high.

INTEREST PAID ON PROPERTY LOANS OR MORTGAGES: From April 2017 the full amount of interest paid can no longer be offset against profits from a property business. During the 2017/18 tax year only 75% of the interest is directly claimable as expenses, in 2018/19 this proportion fell to 50%, in 2019/20 it will be 25% and then fall to 0% from 2020/21 onwards. Interest expense not deductible from profits will instead attract a tax credit calculated at the basic rate of interest. This will reduce the tax relief available to landlords with large profits who pay tax at the higher rates but will leave basic rate taxpayers unaffected. Allowable expenses for 2017/18 are found here.

INTEREST RECEIVED ON SAVINGS: Bank or investment interest must be separated into that received gross and that received with basic rate tax deducted at source (as usually happens with interest on bank and building society accounts). The two categories of interest must be entered separately into two different boxes designated for these categories, otherwise the calculation of tax liability will be incorrect

DIVIDENDS: The value of dividends received entered in the dividends box must be the amount actually received. If a gross figure with the tax credit included is entered in this box for tax years before 2016/17 then the tax liability will be overestimated. In 2016/17 dividends tax credits were abolished so the amount received is the gross amount. In 2017/18 up to £5,000 could be received by anyone tax free, but this year (2018/19) the tax free dividend amount has been reduced to £2,000. 

ACCOUNTING YEAR: Trading profits and Property income are those for the accounting period assessable in the chosen tax year. This accounting period could end at any time during the tax year. However employment income is that earned between April 6th at the start of the tax year and April 5th at the end of the tax year..

TAX DEDUCTED AT SOURCE: Deduction of tax at source on interest ceased in the 2016/17 tax year.  Up to £1,000 interest can be received tax free by anyone regardless of their other income.
Further details are here (opens in new window):   Change to tax on interest in 2016

Actual PAYE tax on employment income may differ from the value calculated here on account of taxable benefits in kind received, salary sacrifice arrangements, bonuses or other one-off payments or deductions made by an employer.

Rounding of values in the software algorithms may cause the tax payable to differ by a few pence from alternative computations using the same input figures.

This calculator should not be used to calculate tax for any other tax year than those available for selection from the drop down menu at the top of this page.

This calculator requires correct input figures in order to generate a correct tax liability

This calculator is only intended to give a calculation of income tax and National Insurance subject to the above conditions. Four Elms Bookkeeping accepts no liability for the use of output generated by this calculator.