You can bet that many sole traders will be asking themselves the same question: ‘what tax band am I in?’. The answer depends on your taxable income and where you live in the UK.
From April 2025, self-employed people can submit their Self Assessment tax return for the 2024/25 tax year. HMRC will then use this to work out your taxable income and therefore which tax band you’ll fall into. They’ll factor in information such as your income and expenses.
You’ll then either be classed as:
- A basic rate taxpayer, higher rate taxpayer, or additional rate taxpayer if you live in England, Wales or Northern Ireland
- A starter, basic, intermediate, higher or top rate taxpayer if you live in Scotland
Here, we discuss the various rates and thresholds by country, as well as how the latest tax changes may impact you this tax year.
INCOME TAX
The following tax bands for 2025/26 apply if you live in England, Wales or Northern Ireland. They should help you to answer the question ‘what tax band am I in?’:
| Band | Taxable income | 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% |
Your personal tax allowance is maxed at £12,570. This means that you can earn anything below this figure and not pay tax.
Then, with the marginal bands, you only pay this tax rate on the stipulated portion of earnings. So, if you have a taxable income of £37,000, you would pay 20% Income Tax on £24,430 (£37,000 minus the Personal Allowance of £12,570).
In Scotland, taxpayers pay according to a slightly different model. Not only are there more bands, but the rates are different to other countries within the UK. The bands for the 2025/26 tax year in Scotland are:
| Tax thresholds and rates | Taxable income |
|---|---|
| Personal Allowance (tax free) | Up to £12,570 |
| Starter rate (19%) | £12,571-£14,732 |
| Basic rate (20%) | £14,733-£25,688 |
| Intermediate rate (21%) | £25,689-£43,662 |
| Higher rate (41%) | £43,663-£150,000 |
| Top rate (46%) | Over £150,000 |
National Insurance
When it comes to your National Insurance Contributions as a sole trader, you may pay both Class 2 and 4.
Class 2 National Insurance is a fixed weekly amount. If your profits are above £12,570, this will be £3.45 per week. If not, you’re exempt.
Class 4 National Insurance is calculated according to your earnings.
| Class 4 National Insurance Contribution | Profits |
|---|---|
| N/A | Up to £12,570 |
| 9% | £12,571-£50,270 |
| 2% | Over £50,270 |
Scottish National Insurance rates are the same as those in Northern Ireland, England and Wales.
CAPITAL GAINS TAX
If you sell or dispose of an asset that is worth more than £6,000, then you may need to pay Capital Gains Tax. To help you determine whether or not this applies to you, HMRC has a list of what they mean by an asset.
The annual exemption amount for 2025/26 is set at £6,000. The rate of Capital Gains Tax you’ll pay depends on which tax bracket you fall into:
| Tax band | Rate on gains from residential property | Rate on gains from other asset |
|---|---|---|
| Basic | 18% | 10% |
| Higher | 28% | 20% |
| Additional | 28% | 20% |
Tax band
Again, for Scottish taxpayers, the rates are the same.
Arrange a review today. Alternatively, if you’d like to learn more, don’t hesitate to speak to our team.
Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.
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