Running your own business as a sole trader gives you freedom — you set your hours, choose your clients and keep every pound of profit after tax. But that freedom comes with one job nobody else does for you: working out your own tax bill and paying it on time. This guide explains every tax you pay in 2026/27 in plain English, with real numbers you can check against your own books.
Direct answer: As a woman running a sole trader business in 2026/27, you pay Income Tax on your profits above the £12,570 Personal Allowance, plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270. You report everything through Self Assessment, and most of your bill is paid in two instalments called payments on account.
What taxes does a woman sole trader actually pay?
As a sole trader you are not an employee of your own business, so there is no PAYE and no employer handling tax for you. Instead, three things make up almost every sole trader’s tax bill:
- Income Tax on your taxable profit — the biggest part of the bill for most women.
- Class 4 National Insurance on the same profit, charged at 6% and then 2%.
- Class 2 National Insurance — effectively £0 for most sole traders now, because it is treated as paid once your profits reach £7,105.
On top of that, two things can apply depending on your situation. If your turnover passes £90,000 in a 12-month period you must register for VAT. And if your bill is large enough, HMRC splits it into payments on account, which we explain below. There is no separate “women’s tax” or different rate for women — the rules are the same for every sole trader. What differs is the shape of many women’s businesses: part-time starts and income that grows gradually around family life. For the general rules in full, see our guide to business tax for sole traders.
Income Tax rates for sole traders in 2026/27
You pay Income Tax on your profit, not your turnover. Profit is what is left after you deduct allowable business expenses from your income. The first £12,570 of profit is tax-free, thanks to the Personal Allowance, and the rest is taxed in bands:
| Band | Profit in this band | Tax rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
These are the England, Wales and Northern Ireland bands for the 2026/27 tax year (6 April 2026 to 5 April 2027), published on GOV.UK’s Income Tax rates page. Scotland sets its own bands, so check the Scottish rates if you live there. One warning that catches many women out: once your income passes £100,000, your Personal Allowance shrinks by £1 for every £2 above that limit, and it disappears entirely at £125,140. That creates an effective 60% tax rate in that band, so plan carefully if a big year is coming.
National Insurance: Class 4 and Class 2
National Insurance is the part of the bill sole traders most often forget, and it is charged on the same profit figure as Income Tax — but with different thresholds.
| Class | When it applies (2026/27) | Rate |
|---|---|---|
| Class 4 | Profits £12,570 to £50,270 | 6% |
| Class 4 | Profits over £50,270 | 2% |
| Class 2 | Profits of £7,105 or more | Treated as paid — £0 to pay |
| Class 2 (voluntary) | Profits under £7,105 | £3.65 a week, if you choose to pay |
Class 4 is collected through your Self Assessment return, alongside your Income Tax — there is no separate bill. Class 2 changed in April 2024: it is no longer compulsory. If your profits are at least £7,105, the year still counts towards your State Pension as if you had paid it. If your profits are below £7,105 — common in a first year, or a quiet year around caring responsibilities — you can choose to pay voluntary Class 2 at £3.65 a week to protect your State Pension record. For many women whose business is their main route to a pension, that £3.65 a week is money well spent.
Worked example: what tax on £40,000 profit?
Meet Sarah, a freelance graphic designer working from home. Her business earned £52,000 in 2026/27 and she spent £12,000 on allowable expenses — software, a new laptop, travel to clients and a share of her home broadband. Her taxable profit is £40,000. Here is her bill:
| Calculation | Amount | |
|---|---|---|
| Income Tax | (£40,000 − £12,570) × 20% | £5,486.00 |
| Class 4 NIC | (£40,000 − £12,570) × 6% | £1,645.80 |
| Class 2 NIC | Profits over £7,105 — treated as paid | £0 |
| Total tax bill | £7,131.80 |
That is just under 18% of her profit. A good rule of thumb is to set aside 20–25% of every payment you receive into a separate savings account, so the money is there when HMRC asks for it. Here is how the bill changes at other profit levels:
| Profit | Income Tax | Class 4 NIC | Total bill |
|---|---|---|---|
| £20,000 | £1,486.00 | £445.80 | £1,931.80 |
| £40,000 | £5,486.00 | £1,645.80 | £7,131.80 |
| £60,000 | £11,432.00 | £2,456.60 | £13,888.60 |
Notice how the bill jumps at £60,000: part of the profit falls into the 40% band, and Class 4 drops to 2% above £50,270. Knowing where the thresholds sit helps you plan — for example, bringing forward a planned expense before 5 April can keep you in the 20% band for another year.
Allowable expenses that cut your tax bill
Every pound of allowable expense you claim reduces your taxable profit by a pound — and therefore reduces both your Income Tax and your Class 4 bill. Many women sole traders under-claim because they are unsure what counts. The test is simple: was the cost incurred wholly and exclusively for the business?
| Usually claimable | Usually NOT claimable |
|---|---|
| Stock, materials and goods you sell | Personal food, clothing and travel |
| Business phone, broadband and software | The full cost of a home you also live in (claim a proportion) |
| A share of home office costs (rent, heating, electricity) | Childcare costs (not a business expense) |
| Travel to clients and business mileage (45p/mile for the first 10,000 miles) | Fines and penalties |
| Advertising, website and marketing | Personal grooming and everyday clothes |
| Professional fees, insurance and training for your trade | Entertaining clients (generally not allowable) |
Keep every receipt, and keep business money separate from personal money — even a second bank account or a simple spreadsheet helps. If your turnover is under £1,000 in the year, you do not even need to register: the £1,000 trading allowance covers it. But once you pass that, register as self-employed and start recording expenses from day one.
Payments on account: the bill that surprises new sole traders
Here is the shock that hits almost every sole trader in year two. HMRC does not just ask for last year’s tax — it asks for next year’s tax in advance too. These advance payments are called payments on account. Each one is half of your previous year’s bill, and they fall due on 31 January and 31 July.
Imagine Sarah’s £7,131.80 bill for 2025/26. On 31 January 2027 she pays that £7,131.80, plus a first payment on account of £3,565.90 towards 2026/27 — a single payment of £10,697.70. Then on 31 July 2027 she pays the second £3,565.90. If her 2026/27 bill turns out higher, she pays the difference the following January; if it is lower, HMRC refunds the overpayment or reduces the next instalments. The system is fair, but only if you expect it. The women who get caught out are the ones who spend the whole of their first year’s profit and then face a January bill worth one and a half years of tax. Set money aside from every invoice, and January stops being scary.
Key deadlines for the 2026/27 tax year
| Date | What is due |
|---|---|
| 31 January 2027 | First payment on account for 2026/27 (plus any 2025/26 balancing payment) |
| 31 July 2027 | Second payment on account for 2026/27 |
| 5 October 2027 | Register for Self Assessment if you started trading in 2026/27 |
| 31 October 2027 | Paper tax return deadline |
| 31 January 2028 | Online tax return and balancing payment for 2026/27 |
| Quarterly (7 Aug, 7 Nov, 7 Feb, 7 May) | Making Tax Digital quarterly updates, if your income is over £50,000 |
Making Tax Digital for Income Tax started in April 2026 for sole traders with income over £50,000. If that is you, you must keep digital records and send HMRC a quarterly summary of your income and expenses, plus a final declaration. It replaces the single annual return, not the tax itself — the rates and deadlines above still apply.
5 mistakes women sole traders make with tax
- Mixing business and personal money. One account for everything makes it impossible to prove expenses and easy to overspend tax money. Open a separate account, even a free one.
- Forgetting National Insurance. Income Tax is only part of the bill. Add 6% Class 4 on profits over £12,570 when you estimate what to set aside.
- Missing the payments-on-account shock. Your second January bill is roughly 1.5 times your first. Budget for it from your first year.
- Not claiming home costs. If you work from home, a fair share of rent, heating, electricity and broadband is claimable. Use HMRC’s simplified flat rate if the calculation feels daunting.
- Leaving registration too late. Tell HMRC by 5 October after the tax year you started trading. Late registration can mean penalties, and penalties are charged on top of the tax you already owe.
Frequently asked questions
Do I pay tax if my sole trader business makes less than £12,570?
No Income Tax and no Class 4 National Insurance, because your profit is inside the Personal Allowance. But you must still register and file a return if HMRC asks you to, and your Class 2 record is treated as paid once profits reach £7,105.
How much should I set aside for tax as a sole trader?
Set aside 20–25% of your profit (not turnover) as a minimum. At £40,000 profit the real bill is about 18%, but the extra buffer covers payments on account and any income that pushes you into the 40% band.
Is childcare an allowable business expense?
No. HMRC does not allow childcare as a business expense, even if you only need it so you can work. Check instead whether you qualify for Tax-Free Childcare, which is worth up to £2,000 per child per year.
Do I need an accountant as a woman sole trader?
Not legally — you can file your own return. But a one-off session with an accountant in your first year often pays for itself, especially if your income is near a threshold or you are unsure which expenses you can claim.
Conclusion
Business tax for a woman sole trader is simpler than it looks once you know the moving parts: Income Tax above £12,570, Class 4 National Insurance at 6% then 2%, and payments on account that split the bill across January and July. The numbers in this guide are the 2026/27 rates, so check them against your own profit and set aside 20–25% of every payment as you go. Do that, keep your receipts, and tax becomes a routine admin task — not the January panic it is for so many new sole traders. And if your business keeps growing, the next question is whether a limited company would save you tax — a decision worth taking with an accountant.
