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We are currently updating our website for the 2024/25 tax year. Please bear with us for a short while as we do this. 

Note: From 6 January 2024, the main rate of class 1 National Insurance contributions (NIC) deducted from employees’ wages reduced from 12% to 10%. From 6 April 2024, that rate is reduced further to 8%, the main rate of self-employed class 4 NIC is reduced from 9% to 6% and class 2 NIC is no longer due. Those with profits below £6,725 a year can continue to pay class 2 NIC to keep their entitlement to certain state benefits. We will include these changes with our updates in the next few weeks.

Updated on 6 April 2024

Paying tax on self-employed profits and making payments on account

You pay income tax and National Insurance contributions (NIC) on your self-employed profits if you earn above certain thresholds. This page looks at how you pay the tax and NIC on your income from self-employment.

coins, the word tax, with a lit up city scene in the background.
Number1411 / Shutterstock.com

Content on this page:

Payment deadlines

You pay tax on your self-employed profits under self assessment.

Remember you pay Class 4 National Insurance contributions (NIC) at the same time as your income tax. From here on, we will refer to income tax, but that should be assumed to include any Class 4 NIC also due.

For information on Class 2 NIC see our NIC for the self-employed page.

Generally speaking, you pay your income tax for a tax year in three instalments as follows:

Date Income tax payable
31 January during the tax year 50% of prior year self assessment income tax liability (known as the first payment on account)
31 July following the tax year 50% of prior year self assessment income tax liability (known as the second payment on account)
31 January following the tax year Balance of any income tax due (known as balancing payment), plus the first payment on account for the next tax year

  Class 2 NIC and/or student loan repayments due are always paid as part of the balancing payment and are not included in payments on account.

Example – payments on account

Marcus has an income tax (including Class 4 NIC) liability of £2,500 for the 2022/23 tax year and he also has a Class 2 NIC liability of £163.80, Therefore his total payments for the 2022/23 tax year are £2,663.80 (£2,500 + £163.80).

His income tax (including Class 4 NIC) liability for 2023/24 is £3,500, and his Class 2 NIC bill is £179.40. His payments for the 2023/24 tax year are as follows:

Date Income tax payable
31 January 2024 £1,250 (50% of the 2022/23 tax liability)*
31 July 2024 £1,250 (50% of the 2022/23 tax liability)
31 January 2025 £2,929.40, which is £1,000 (balancing payment for 2023/24) plus £1,750 (50% of £3,500, first payment on account for 2024/25), plus £179.40 (Class 2 NIC for 2023/24)


*Marcus will also pay his Class 2 NIC (£163.80) for the 2022/23 tax year by 31 January 2024.

You will see that in this case for Marcus there are two amounts being paid on 31 January 2025 – the balance due for 2023/24 (£1,179.40) and the first payment on account for 2024/25 (£1,750).

If you do not come within the payments on account regime, then you usually have to pay any amounts that you owe to HMRC by 31 January following the end of the tax year in question. So, if you owe tax and NIC on your self employment income for the 2023/24 tax year this is usually due by 31 January 2025. See our Self assessment page for more information.

Reducing payments on account

It is possible to reduce your payments on account if you estimate that your taxable income will be lower than the previous tax year. This may be the case if your profits have fallen when compared to the previous year. By reducing payments on account, you pay a lower amount in advance. This means that, hopefully, you avoid overpaying tax for the tax year unnecessarily.

Example – reducing payments on account

Robert is self-employed and has no other income. His income tax liability (excluding Class 2 NIC) for the 2023/24 tax year is £2,800. Robert will need to make payments on account for the 2024/25 tax year. He did not need to make payments on account in respect of the 2023/24 tax year.

By 31 January 2025, Robert will need to pay his 2023/24 income tax liability, his Class 2 NIC for 2023/24, and the first payment on account for the 2024/25 tax year.

His 2024/25 payments on account will be based on half of his 2023/24 income tax liability. Robert will therefore need to make payments on account of £1,400 by 31 January 2025 (50% of £2,800) and a further £1,400 by 31 July 2025.

Robert knows that his income for the 2024/25 tax year is likely to be much lower than that for 2023/24, so he can claim to reduce his payments on account. Robert works out that he will have an income tax bill for the 2024/25 tax year of around £2,200.

His payments on account were originally £1,400 each, so the overall reduction will be £600 (that is, £2,800 less £2,200). He therefore claims to reduce each of his 2024/25 payments on account by £300 each to £1,100. Robert pays the first (reduced) payment on account of £1,100 by 31 January 2025.

On 8 February 2025, Robert realises that he has reduced his payments on account by too much. He thinks he will have an income tax bill for the 2024/25 tax year of nearer £2,500 rather than £2,200.

Robert contacts HMRC to let them know he will need to pay more on each instalment. As he has paid £1,100, he needs to pay a further £150 on that instalment and he will also need to pay £1,250 (50% of £2,500) by 31 July 2025. HMRC received Robert’s additional payment of £150 for his first payment on account on 12 February 2025.

The second payment on account was not due when Robert notified HMRC, so there is no extra interest to pay on that. But he will have to pay interest on the additional £150, which should have been paid with the first instalment on 31 January 2025. The interest will run from 1 February 2025 to 12 February 2025 – the date HMRC received payment of the £150.

We explain how you can reduce your payments on account on our Self assessment tax payments page.

Preparing for your tax bill

For most people, setting aside a rough percentage (%) of their ‘net’ income each time they are paid (after any expenses), will help make sure that their tax bill, along with the payments on account, can be met. Our table may help you work out your rough percentage using 2024/25 rates, assuming you are using the cash basis, or if using the accruals basis and you get paid promptly. Please note this does not include Class 2 NIC and that these are based on UK income tax rates. We publish information separately on Scottish rates of income tax and the Welsh rates of income tax.

Projected net income £ Total first year’s tax and Class 4 NIC (excluding Class 2 NIC) £ First year’s payment plus next year’s payments on account Rough percentage of net income to save

17,500

1,281.80

1,922.70

11%

20,000

1,931.80

2,897.70

14%

22,500

2,581.80

3,872.70

17%

Example – estimating tax payments

Maia began trading as an electrician in April 2024. She estimates that in the 2024/25 tax year she will invoice approximately £22,000 and expects her expenses to be around £2,500, resulting in profits of £19,500. Maia looks at the table above and decides to put aside 14% of her ‘net’ income each time her invoices were paid, meaning at the end of the tax year, she had saved £2,730 towards her tax bill.

On completion of her accounts and tax return Maia calculates her actual profits to be £19,000 instead of £19,500 and her 2024/25 tax bill looks like this:

 

£
Net profit from self-employment

19,000
Less personal allowance:

12,570
Taxable income

6,430
 

 
Tax due on £6,430 @ 20%

1,286.00
Class 4 NIC (£19,000 - £12,570) x 6%

385.80
Class 2 NIC

nil
Total payable for 2024/25 tax year

1,671.80
   
First payment on account for 2025/26 tax year (£1,286 + £385.80 = £1,671.80. £1,671.80 x 50% = £835.90)

835.90
Total due by 31 January 2026

2,507.70

We can see that Maia has saved enough to pay what she needs to by 31 January 2026. She has some left over to go towards her second payment on account of £835.90 due on 31 July 2026.

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