On a Self Assessment return for the 2025-26 tax year, you pay nothing on the first £12,570 of income, 20% on income up to £50,270, 40% between £50,271 and £125,140, and 45% above that. If you’re self-employed, add Class 4 National Insurance at 6% on profits between £12,570 and £50,270 and 2% on profits above £50,270. Dividends, capital gains, and student loan repayments get bolted onto the same bill. How much tax you pay on Self Assessment depends on which of those pieces apply to you and what expenses you can subtract before the rates kick in.
Income Tax Bands and the Personal Allowance
Your Personal Allowance is £12,570 for 2025-26. You owe no Income Tax on earnings up to that amount.1GOV.UK. Income Tax Rates and Personal Allowances Everything above it falls into bands:
- Basic rate of 20% on taxable income from £12,571 to £50,270
- Higher rate of 40% on taxable income from £50,271 to £125,140
- Additional rate of 45% on taxable income above £125,140
These rates apply to what’s left after you subtract the Personal Allowance from your gross income. Someone earning exactly £50,270 pays 20% on the £37,700 above the allowance, not on the full figure.2GOV.UK. Income Tax Rates and Allowances for Current and Previous Tax Years
The £100,000 Trap
Above £100,000, the Personal Allowance shrinks by £1 for every £2 of income.1GOV.UK. Income Tax Rates and Personal Allowances By £125,140 the allowance is gone entirely. That produces an effective marginal rate of 60% on income between those two figures, because you’re paying 40% on newly exposed income while simultaneously losing allowance you would otherwise have kept. This catches people out more than any other feature of the system.
Marriage Allowance
If you’re married or in a civil partnership and one partner earns below the Personal Allowance, the lower earner can transfer £1,260 of unused allowance to the higher earner, cutting the higher earner’s tax by up to £252 a year.3GOV.UK. Marriage Allowance – How It Works It only applies where the higher earner is a basic rate taxpayer.
National Insurance If You’re Self-Employed
Self-employed people pay National Insurance through Self Assessment alongside Income Tax. Older guides quoting 9% or 8% rates are out of date.
Class 4 is the main charge. For 2025-26 you pay 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.4GOV.UK. Self-Employed National Insurance Rates It’s calculated automatically when you complete your return.
Class 2 protects your entitlement to the State Pension and benefits like Maternity Allowance. If your profits are £6,845 or more, Class 2 is treated as paid without you actually handing over any money.4GOV.UK. Self-Employed National Insurance Rates Below that threshold, you can pay voluntarily at £3.50 a week to keep your record intact.
A Worked Example
Say you have £15,000 in employment income and £4,000 in self-employment profits. Total income: £19,000. Subtract the £12,570 Personal Allowance and you’re left with £6,430 of taxable income. At 20%, that’s £1,286 in Income Tax. If your employer already deducted £486 through PAYE, the Income Tax portion of your Self Assessment bill is £800. National Insurance is added on top, and because your self-employment profits fall below the £12,570 Class 4 starting point, you owe no Class 4 in this scenario.
Dividends and Capital Gains
Self Assessment isn’t just for trading income. Dividends and asset sales land on the same return.
Everyone gets a £500 dividend allowance for 2025-26. Above that, the rate follows the Income Tax band the dividend income falls into: 8.75% for basic rate, 33.75% for higher rate, 39.35% for additional rate. The dividend allowance was £2,000 as recently as 2022-23, so portfolios that used to produce no tax now often do.
For capital gains, the annual tax-free amount is £3,000 for 2025-26.5GOV.UK. Capital Gains Tax – Rates and Allowances Basic rate taxpayers pay 18% on most gains above that; higher and additional rate taxpayers pay 24%. Residential property gains follow the same rates from April 2025.
Expenses That Reduce Your Bill
Tax is charged on profit, not revenue, so every legitimate business expense you deduct lowers the figure the rates apply to. Common deductibles include office supplies, business travel, professional fees, insurance, advertising, and the cost of goods sold. If you work from home, a proportion of heating, electricity, and broadband can be claimed based on how much of the home is used for business.
Expenses must be incurred wholly and exclusively for business purposes. A laptop used only for work qualifies fully; one used for work and personal browsing can be claimed in part. HMRC scrutinises mixed-use items closely, and if you’re investigated the burden of justifying each deduction sits with you.
If your self-employed income is only slightly above £1,000, there’s an alternative: the £1,000 trading allowance can be used instead of itemised expenses, but not alongside them for the same income.6GOV.UK. Tax-Free Allowances on Property and Trading Income
Student Loan Repayments
If you have a student loan, HMRC calculates repayments from the total income on your return at 9% above your plan’s threshold. For 2025-26 the thresholds are £26,900 for Plan 1, £29,385 for Plan 2, £33,795 for Plan 4, £25,000 for Plan 5, and £21,000 for Postgraduate Loans.7GOV.UK. Repaying Your Student Loan – How Much You Repay These appear on your Self Assessment bill next to tax and National Insurance, which is something people who’ve only ever been paid through PAYE often don’t expect.
Payments on Account
If last year’s Self Assessment bill topped £1,000, HMRC requires two advance payments toward the current year, each equal to half the previous year’s Income Tax and Class 4 National Insurance.8GOV.UK. Understand Your Self Assessment Tax Bill – Payments on Account The first is due 31 January alongside the balance for the tax year just ended. The second falls on 31 July.
For first-time filers this produces a sharp cash flow hit: the full bill for the year that ended, plus 50% of the estimated bill for the year in progress, all due on the same January date. You can end up paying up to 150% of your annual tax in one go.
If your income drops, you can apply to reduce payments on account using form SA303.9GOV.UK. Claim to Reduce Payments on Account Reduce too far and HMRC charges interest on the shortfall once your actual bill is settled.
What It Costs to File or Pay Late
Missing the filing deadline triggers a £100 penalty straight away, even if you owe no tax. From there the penalties stack:10GOV.UK. Self Assessment Tax Returns – Penalties
- Up to 3 months late: £100 initial penalty
- 3 to 6 months late: £10 per day, up to £900
- 6 months late: 5% of the tax due or £300, whichever is greater
- 12 months late: another 5% of the tax due or £300, whichever is greater
Late payment carries its own penalties on top: 5% of unpaid tax at 30 days, again at 6 months, and again at 12 months.10GOV.UK. Self Assessment Tax Returns – Penalties Interest also accrues daily on the outstanding balance from the payment deadline until you clear it.