How do I pay tax on self-employed income?

How do I report my self-employed income?

When you have calculated your taxable profits from self-employment, you will need to report that income to HM Revenue & Customs’ (HMRC) so that you can pay the correct amount of tax, unless you are entitled to trading allowance full relief. If this is the case you may not need to report this income to HMRC.

Once you have registered as self-employed with HMRC you will receive a notice shortly after the end of the tax year to tell you that you need to complete a tax return for the tax year that has just finished. See How do I register for tax and National Insurance? for more information.

In 2015, the government announced their intention to abolish Self Assessment tax returns. The tax return system will eventually be replaced by HMRC’s ‘Making Tax Digital for Income Tax’ regime for some self-employed taxpayers. This new way of providing HMRC with details of self-employment income is currently in the pilot stage. It is due to come into effect from April 2026 onwards for those who are affected.  For more information, see our webpage: Making Tax Digital for Income Tax.

When do I have to send my tax return to HMRC?

This depends on the date of issue of the notice that HMRC send you to tell you to complete a tax return and whether you complete your tax return on paper or online. The table below summarises the position.

Date of tax return or notice to file issued	Deadline for lodging paper return	Deadline for lodging return online
On or before 31 July	31 October	31 January
1 to 31 August	3 months from date of notice	31 January
1 September to 31 October	3 months from date of notice	31 January
After 31 October	3 months from date of notice	3 months from date of notice

There are penalties for missing the deadlines for filing tax returns.

If you miss the submission date an automatic penalty of £100 for late filing will be charged, even if you have no tax to pay or you have already paid the tax you owe. But you may have grounds to appeal against a late filing penalty. See our penalties page for more information.

However, if you miss the paper return filing deadline you may still have time to register with HMRC for online filing (if you are not already registered) and then submit the tax return online by the online filing deadline and so avoid a late filing penalty.

⚠️ An important point to note if you are a partner in a partnership is that HMRC do not provide an online partnership return. Therefore, if you cannot file the partnership return by other means (such as via a tax adviser or using third party software) you must file a paper version of the return by the relevant paper due date to avoid late filing penalties in relation to the partnership tax return.

What if I have problems in completing my tax return?

If you get a tax return, please do not worry if you are not sure how to fill it in. There is information on our website which may help you. You can also contact HMRC for help. If you are concerned about completing the form contact the phone number on any of your Self Assessment correspondence or HMRC’s Self Assessment helpline number. Alternatively, you may wish to contact the charity TaxAid who offer help to those on low incomes with tax problems. They can be contacted via their helpline 0345 120 3779 (Monday to Friday, 9am to 5pm).

What if I make a mistake on my tax return?

If after you have filed your tax return you become aware that an entry is incorrect, you can amend that return. Although you should amend your tax return as soon as you realise you have made a mistake, you do have up to 12 months from 31 January following the end of the tax year to which the tax return relates to make the amendments (or if the notice to file the return was issued after 31 October, you can amend the tax return within 15 months of that notice being issued).

Therefore, if you need to amend your 2021/22 tax return you normally have until 31 January 2024 to make the amendment. This applies whether you manually filed a paper version of the return or you filed online. Or if, for example, you did not receive a notice requiring you to file your tax return for 2021/22 until 12 December 2022, then you can amend it up until 11 March 2024.

If you need to amend your tax return outside of these time limits then you need to notify HMRC so that your tax position can be corrected. If additional tax is due HMRC should issue a revised calculation once the mistake is rectified and there may be penalties. If tax is overpaid due to the mistake, you should make a claim for overpayment relief to obtain a refund. You can read about how to do this in the section: How do I claim a refund if it is too late to amend my tax return?.

GOV.UK explains how you can make an amendment to your tax return whether you have filed an online tax return using either HMRC’s online system or commercial software or a paper tax return.

If you have claimed the fourth and/or fifth Self-Employment Income Support Scheme (SEISS) grants, then you will need to consider whether amendments to your tax return(s) mean you were not actually eligible to claim these grants or whether the grant(s) received should have been less. We have more guidance on this in our SEISS page.

Who calculates the amount of tax I owe?

If you submit your tax return on paper, HMRC normally calculate your tax for you and send you a tax calculation, known as a form SA302.

If you send a paper tax return after 31 October (which you should avoid doing, if possible, as you will usually incur a penalty for late filing), HMRC may calculate your tax, but they do not guarantee to tell you how much tax you owe in time for the payment deadline of 31 January.

If you submit your tax return online, HMRC’s online system will calculate your tax automatically, and you can view the calculation online or print it out.

You may already have had tax deducted from some income, for example you are registered under the Construction Industry Scheme (CIS) or you are employed and self-employed. In this situation you include all the income on the tax return, whether or not it has already been taxed, and also include the tax that has been deducted at source. The tax calculation will then automatically take account of any tax paid at source (for example, through CIS or PAYE) so the final position shown by the calculation will be the amount that is left to be paid through Self Assessment or to be refunded. 

Example: Chloe

Chloe is employed part-time and also runs her own business. During the 2022/23 tax year she earns £15,000 from her job and pays tax through PAYE of £486, she also earns profits of £4,000 from her self-employment. When Chloe completes her 2022/23 tax return she includes all her employment income and tax deducted through PAYE and her self-employment profits. Her tax calculation will look as follows (ignoring National Insurance contributions for this illustration):

Tax calculation
Employment income	£15,000
Self-employment profits	£4,000
Total income received	£19,000
minus Personal Allowance	(£12,570)
Total income on which tax is due	£6,430
Income tax due at 20%	£1,286
minus tax deducted	(£486)
Total income tax due by 31 January 2023	£800

If you are in scope to make payments on account, any payments on account already made should then be compared to the final position shown by the calculation to see whether there is any further amount to pay (known as the balancing payment) or whether a refund is due. You do not include any tax paid as a payment on account anywhere on the tax return form itself. We explain more about this in the payments on account section below. 

We illustrate this below:

Assume that Chloe had higher profits in the 2021/22 tax year so was due to make payments on account totalling £1,200 for the 2022/23 tax year as follows:

• 31 January 2023: £600
• 31 July 2023: £600

When Chloe submits her 2022/23 tax return online in November 2023 her total income tax due would still show as £800 even though she is actually due a refund of £400 (£600 +£600 less £800) as she has overpaid her tax through payments on account. Chloe will need to deduct her payments from the online calculation to work out she is due a refund. After the online tax return has been automatically processed Chloe should be able to see that she is due a refund in her HMRC personal tax account and claim this back from HMRC.

When do I pay income tax on my self-employed profits?

You pay tax on your self-employed profits at the same time as you pay tax on all of your other income for a tax year 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 when you pay your Class 2 NIC see our section How and when do I pay my Class 2 and Class 4 NIC?.)

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

Date	Amount payable
31 January during the tax year	50% of prior year Self Assessment income tax liability (known as first payment on account)
31 July following the tax year	50% of prior year Self Assessment income tax liability (known as second payment on account)
31 January following the tax year	balance of any income tax due (known as balancing payment) PLUS first payment on account for next tax year

⚠️ Note: 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: Marcus

Marcus has an income tax (including Class 4 NIC) liability of £2,500 for 2021/22 and he also has a Class 2 NIC liability of £158.60, Therefore his total payments for the 2021/22 tax year are £2,658.60. His income tax (including Class 4 NIC) liability for 2022/23 is £3,500, and his Class 2 NIC bill is £163.80.

His payments for 2022/23 are as follows:

31 January 2023	£1,250 (50% of £2,500)
31 July 2023	£1,250 (50% of £2,500)
31 January 2024	£2,913.80 which is £1,000 (balancing payment) PLUS £1,750 (50% of £3,500) PLUS £163.80 (Class 2 NIC for 2022/23 tax year)

You will see that in this case for Marcus there are two amounts being paid on 31 January – the balance due for one year and a payment on account for the following year.

If you do not come within the payments on account regime (see section below) then you usually have to pay any amounts that you owe to HMRC by the 31 January following the end of the tax year in question. So, if you owe anything for the 2022/23 tax year this is usually due by 31 January 2024. An exception is where you owe capital gains tax on the disposal of UK residential property (or, if non-resident, any UK land or property).

See our section: When do I make Self Assessment payments and file my tax return? for more information.

What are payments on account?

⚠️ Note: References to ‘income tax’ include Class 4 NIC.

Payments on account are basically a way of paying some of your income tax bill in advance. You normally have to make a payment on account if your previous year’s income tax bill (excluding Class 2 NIC) was over £1,000, unless more than 80% of your previous year’s income tax was taken off at source. Income tax will be taken at source if, for example, you are employed as well as self-employed, in which case tax will probably be deducted through Pay As You Earn (PAYE) from your employment income or if you are a self-employed subcontractor and come within the Construction Industry Scheme (CIS), in which case you will probably have deductions of tax made by contractors from your invoices.

The payments on account are based on your total income tax bill for the previous year but excluding Class 2 NIC. So you must first deduct any Class 2 NIC amount and if you need to make payments on account, each one will be half of this amount. They are due on

• 31 January during the tax year
• on 31 July following the tax year.

On 31 January you also pay any balance of income tax due for the previous tax year together with the Class 2 NIC due for that year, so you may have two amounts to pay (the balancing payment for the previous year and the first payment on account for the current tax year), but you can pay both together as a single total.

Example: Robert

Robert's income tax liability (excluding Class 2 NICs) for 2022/23 is £2,800. PAYE and tax paid at source cover less than 80% of the total due. Robert will need to make payments on account for 2023/24 (the year to 5 April 2024). By 31 January 2024 Robert will need to pay the balance of his 2022/23 income tax liability and his Class 2 NIC for 2022/23 and will also need to make a payment on account for the tax year 2023/24 (year ending 5 April 2024).

His 2023/24 payments on account will be based on half of his 2022/23 income tax liability. Robert will therefore need to make payments on account of £1,400 on 31 January 2024 and £1,400 on 31 July 2024.

If HMRC make an amendment to your return or you notify them of an amendment that will increase the tax due, any extra tax will be payable 30 days from the date of the amendment although interest will run from the date that the tax should have been paid.

I expect my tax bill to be less this year than last year. What can I do?

⚠️ Note: References to ‘income tax’ include Class 4 NIC.

If you come within the payments on account system then you can apply to reduce your payments on account. You can do this at any time using form SA303 either online or in paper form up to when the balancing payment is due. 

If you know you will need to reduce your payments on account for the next tax year when you are completing your tax return, you can also make the claim on the tax return form itself giving details of the circumstances in the additional information box at the end of the return. 

⚠️ Please bear in mind that if you reduce your payments on account below what they should in fact have been you will have to pay interest on the shortfall from the date each payment on account was due. In some cases, HMRC may charge a penalty if the reduction is excessive.

Example: Robert continued

Robert's income for 2023/24 is likely to be much lower than that for 2022/23, so he can claim to reduce his payments on account. Robert works out that he will have an income tax bill for 2023/24 of around £2,200. The reduction will be £600. He therefore claims to reduce each of his 2023/24 payments on account by £300 each.

On 8 February 2024, Robert realises that he has reduced his payments on account by too much. He thinks he will have an income tax bill for the year 2023/24 of nearer £2,500 and not £2,200.

Robert contacts HMRC to let them know he will need to pay more on each instalment. He has already paid the 31 January 2024 instalment of £1,100 (half of £2,200) so he needs to pay a further £150 on that instalment and he will also need to pay £1,250 by 31 July 2024. HMRC received Robert’s additional payment of £150 for his first payment on account on 12 February 2024.

The July instalment was not due when Robert notified them so there is no extra interest to pay but he will have to pay interest on the additional £150, which should have been paid with the first instalment on 31 January 2024. The interest will run from 1 February 2024 to 12 February 2023 – the date HMRC received payment of the £150.

I have already paid a payment on account, but now realise I paid too much. What can I do?

You should still complete form SA303. Any excess that you have paid can be refunded to you as long as it is at least 30 days until your next payment is due, or it can be held by HMRC and set against the next payment when it becomes due. If your next payment is due within 30 days, the refund will automatically be held and will be set against the next payment due.

I have never paid payments on account before, but for the 2022/23 tax year I have been asked to pay. Why is that?

The fact that you have to make payments on account towards the 2022/23 tax year suggests that either your income has increased, or that a higher proportion of your income has not  had tax deducted at source. Please note the Self-Employment Income Support Scheme (SEISS) grants and many other coronavirus business support grants are taxable income and may result in you moving into payments on account in respect of the 2022/23 tax year for the first time.

You only make payments on account if your previous year’s income tax and Class 4 NIC bill was above £1,000 and only then if less than 80% of the liability was collected by being deducted at source from the income.

⚠️ Top tip: It can be quite a shock to your cash flow when you first move to payments on account. It may help you to put aside a certain amount each time you get paid into a different bank account (see below). If you submit your tax return as soon as possible it will give you more time to save up for both the current tax which is due and your payments on account for the following tax year.

How can I best prepare for my 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 % using 2023/24 rates assuming you are using the cash basis or if using the accruals basis you get paid promptly. Please note this does not include Class 2 NIC and that these are based on UK income tax rates. See our webpages for information on Scottish rates of income tax and the Welsh rates of income tax:

Net income	Total first year’s tax and Class 4 NIC (excluding Class 2 NIC)	First year’s payment PLUS next year’s POAs	Rough % of net income to save
£17,500	£1,429.70	£2,144.55	12%
£20,000	£2,154.70	£3,232.05	16%
£22,500	£2,879.70	£4,319.55	19%

 

Example: Hugh

Hugh began trading as an electrician in April 2023. He estimates that in the 2023/24 tax year he will invoice approximately £22,000 and expects his expenses to be around £2,500, resulting in profits of £19,500. Hugh looks at the table above and decides to put aside 16% of his ‘net’ income each time his invoices were paid, meaning at the end of the tax year, he had saved £3,120 towards his tax bill.

On completion of his accounts and tax return Hugh calculates his actual profits to be £19,000 instead of £19,500 and his 2023/24 tax bill looks like this:

Net profit from self-employment	£19,000
Less personal allowance:	£(12,570)
Taxable income after deducting personal allowance	£6,430
Tax due on £6,430 @ 20%	£1,286
Class 4 NIC (£19,000-£12,570) x 9%	£578.70
Class 2 NIC (£3.45 x 52 weeks)	£179.40
Total tax bill for 2023/24	£2,044.10
First payment on account for 2024/25 (excluding Class 2 NIC)	£932.35
Total due by 31 January 2025 (including Class 2 NIC)	£2,976.45

We can see that Hugh has saved enough to pay what he needs to on 31 January 2025. He has some left over to go towards his second payment on account of £932.35 due on 31 July 2025.

How do I pay the tax owed?

You will not automatically be issued with a payslip by HMRC in advance of the payment dates on 31 January and 31 July. If you do not receive a payslip you should organise payment anyway otherwise you might incur a fine for late payment and not receiving a payslip from HMRC will not be accepted as a reasonable excuse for late payment.

There are various ways to pay and these are explained on GOV.UK.

I am also employed. Can my tax be collected via my PAYE code number?

Provided the amount you owe to HMRC by 31 January following the end of the tax year is less than £3,000 it may be collected via your Pay As You Earn (PAYE) code in the following tax year. For example, amounts owed by 31 January 2024 for 2022/23 can be collected via PAYE in 2024/25.

However, Class 2 NIC cannot be ‘coded out’ in this way and must be paid by 31 January following the end of the year. In addition, amounts cannot be coded out which would mean that more than 50% of your employee pay was collected for tax.

If you want to take this option, you will need to send in your tax return by 31 October on paper, or by 30 December if you are filing online. If you have filed within these time limits and the tax does not appear to be collected this way, you can contact HMRC to query this.

What happens if I pay my tax late?

You will be charged interest from the date the payment was due until it is paid. You may also be liable to a penalty if your balancing payment is late, unless you have agreed a repayment plan with HMRC before the penalty arises. .

I am having financial difficulties and can’t pay my tax bill. What should I do?

If you cannot pay the amount due in full then you should contact HMRC to discuss the possibility of setting up a time to pay arrangement as soon as possible.