Sole Trader Tax Return Example: Income Tax, NI, and Payments

A sole trader tax return example is easiest to follow with real figures attached. Take a freelance consultant with £30,000 turnover and £5,000 of expenses for the 2025–26 tax year: net profit of £25,000, an Income Tax bill of £2,486, Class 2 National Insurance of £182, and Class 4 National Insurance of £745.80. That comes to £3,413.80 in total, filed and paid by 31 January 2027. The sections below walk through exactly how each number is produced on the Self Assessment forms.

The Figures That Go On The Form

Self-employment income and expenses are reported on form SA103, which sits alongside the main SA100 return. If your turnover is below £90,000, you can use the short version, SA103S, and enter a single total for expenses rather than itemising.¹ Above £90,000 you need the full version, SA103F, which has individual expense lines.²

For our consultant, the entries look like this:

Turnover: £30,000 (gross income from all invoices raised in the tax year, entered before any deductions)
Expenses: £5,000 total, made up of £2,000 for materials and stock, £1,500 for professional fees such as accountant charges and software subscriptions, £800 for travel, and £700 for office costs including phone, stationery, and postage
Net profit: £25,000, which is turnover minus expenses and the figure that feeds the tax calculation

Because turnover is well below £90,000, the whole £5,000 could go into box 20 of the SA103S as total allowable expenses. Itemising in the dedicated boxes creates a clearer audit trail if HMRC ever asks. Either way, check that the totals on your form match your own records before you move on. Mismatches trigger automated queries, and amending a submitted return is more work than getting it right first time.

Working Out The Income Tax

The £25,000 net profit from the SA103 flows into the main return, where the tax-free Personal Allowance is applied. For 2025–26 the standard Personal Allowance is £12,570.³ Subtracting it leaves £12,430 of taxable income.

That £12,430 sits entirely within the basic rate band, taxed at 20%:

£12,430 × 20% = £2,486

The full 2025–26 rate structure for reference:

Basic rate: 20% on taxable income from £12,571 to £50,270
Higher rate: 40% on taxable income from £50,271 to £125,140
Additional rate: 45% on taxable income above £125,140

One trap worth flagging even though it doesn’t hit our example: if your adjusted net income goes over £100,000, the Personal Allowance shrinks by £1 for every £2 above that threshold and disappears entirely at £125,140.³ That produces an effective marginal rate of 60% in the £100,000–£125,140 band, which catches some sole traders out.

Working Out The National Insurance

Sole traders pay two types of National Insurance through Self Assessment, both calculated on net profit and collected with the Income Tax.⁴ For 2025–26 the rates are:⁵

Class 2: £3.50 per week where profits exceed the Small Profits Threshold of £6,845 a year, or roughly £182 for the year
Class 4: 6% on profits between £12,570 and £50,270, plus 2% on profits above £50,270

Applying both to the £25,000 profit:

Class 2: £3.50 × 52 weeks = £182
Class 4: (£25,000 − £12,570) × 6% = £12,430 × 6% = £745.80

The Total Bill

Adding the three components together:

Income Tax: £2,486.00
Class 2 NIC: £182.00
Class 4 NIC: £745.80
Total: £3,413.80

On £25,000 of profit that is an effective combined rate of about 13.7%. The online system does all this arithmetic for you once the figures are in, but running the numbers yourself is the best way to spot data-entry mistakes before you submit.

Why The January Payment Is Bigger Than You Expect

If your Self Assessment bill is £1,000 or more, HMRC requires advance payments toward the following year, called payments on account. Each one is half of the previous year’s total tax and Class 4 NIC liability, due on 31 January and 31 July.⁶

Applied to our example, the £3,413.80 total generates two payments on account of £1,706.90 each. The first is due on the same 31 January as the main bill, so the actual January payment becomes £3,413.80 + £1,706.90 = £5,120.70. The second £1,706.90 falls on 31 July. That January figure is why experienced sole traders set aside somewhere around 25–30% of their profits through the year.

Payments on account do not apply if the bill was under £1,000, or if more than 80% of your tax was already collected at source, for example through PAYE on employment income.⁶ If your income drops sharply, you can apply to reduce them; underestimate and HMRC will charge interest on the shortfall.

Filing And Paying On Time

The deadline for filing online and paying is 31 January after the end of the tax year. For 2024–25 (which ended 5 April 2025) that is 31 January 2026; for 2025–26 it is 31 January 2027.⁷ Paper returns are due earlier, by 31 October. Filing early doesn’t mean paying early: the money is still due by 31 January whenever you submit.

HMRC accepts several payment methods, and clearing times vary:⁸

Same or next day: online banking, Faster Payments, CHAPS, debit card online
Three working days: Bacs, existing Direct Debit, cheque by post
Five working days: first-time Direct Debit setup

Close to the deadline, use a same-day method. A Bacs transfer sent on 30 January might not clear until 2 February, which counts as late.

What Late Filing Or Late Payment Costs

The penalty regime escalates quickly. For late filing:⁹

One day late: automatic £100 penalty, even where no tax is owed
Three months late: £10 per day for up to 90 days, capped at £900
Six months late: 5% of the tax due or £300, whichever is greater
Twelve months late: another 5% of the tax due or £300, whichever is greater

A return filed a full year late can accumulate £1,600 or more in penalties before the tax itself is even considered. Late payment carries a separate track: 5% surcharges on the unpaid tax at 30 days, six months, and twelve months, plus interest on the outstanding balance.⁹ The two tracks run independently, so missing both deadlines compounds fast.

1
HM Revenue & Customs. SA103S 2025 Self-Employment (Short)
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HM Revenue & Customs. Self-Employment (Full) – SA103F 2025
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GOV.UK. Income Tax Rates and Personal Allowances
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GOV.UK. Self-Employed National Insurance Rates
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GOV.UK. Rates and Allowances – National Insurance Contributions
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GOV.UK. Understand Your Self Assessment Tax Bill – Payments on Account
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GOV.UK. Self Assessment Tax Returns – Deadlines
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GOV.UK. Pay Your Self Assessment Tax Bill – Overview
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GOV.UK. Self Assessment Tax Returns – Penalties