By profit
What a £20,000 self-employed profit costs in tax
The figure at which the third and final Making Tax Digital threshold is set, and where a Scottish address still saves a little.
£20,000 of profit leaves a sole trader in England, Wales or Northern Ireland with a 2026/27 bill of £1,932, made of £1,486 Income Tax and £446 Class 4, so £18,068 is kept. A Scottish taxpayer pays £1,892, which is £40 less, because the 19 % starter band still applies and the 21 % intermediate rate only begins at £29,527. The number also matters for paperwork. Making Tax Digital for Income Tax reaches sole traders whose 2026/27 qualifying income is more than £20,000, from 6 April 2028, and qualifying income means turnover before expenses. Takings of exactly £20,000 stay outside; the same profit earned on larger takings does not. This is also the first rung where payments on account start, since the bill is above £1,000: in a first year, the January payment is £2,898.
Self Assessment bill 2026/27
£1,932
Put aside 9.7 % of your profit · next £100 of profit costs 26.0 %
| Profit | £20,000 |
| Income Tax | £1,486 |
| Class 4 National Insurance | £446 |
| Class 2 | treated as paid |
| Kept from your profit | £18,068 |
When you pay, if 2026/27 is your first year
| 31 January 2028: bill + first payment on account | £2,898 |
| 31 July 2028: second payment on account | £966 |
Each payment on account is half of £1,932 (Income Tax and Class 4, loans excluded). How payments on account work
Making Tax Digital at this turnover
Turnover of £20,000 is under every threshold announced so far (the lowest is £20,000). Check your start date
Figures checked by Radif Partners · Editorial policy · How we calculate
One pound over the 2028 line
Making Tax Digital is arriving in three waves, each with a lower bar: more than £50,000, then £30,000, then £20,000. The last wave looks at the 2026/27 tax return, the one covering this very year, and sends those over the bar into the system on 6 April 2028. The test reads turnover, not profit. A window cleaner who invoices £24,000 and spends £4,000 on a van and ladders has the profit this page is about, yet would start on 6 April 2028. A copywriter with £20,000 of sales and nothing to deduct sits exactly on the line and stays out, because the rule says more than. Once in, the year is reported in four quarterly updates, the first due by 7 August, followed by the usual annual return. The qualifying income guide covers rents, partnerships and joint property.
Where Scotland stops being cheaper
At £20,000 a Scottish sole trader pays £40 less. The whole saving comes from one band: the first £3,967 of taxable income at 19 % rather than 20 %. Above that the Scottish basic rate is the same as the rate in the rest of the UK, and Class 4 takes 6 % on both sides of the border, so the gap stays fixed for a while. It starts to close at £29,527, where the 21 % intermediate rate begins, and by about £33,500 of profit the Scottish bill is the larger one.
| Profit | Bill rUK | Bill Scotland | Scotland vs rUK |
|---|---|---|---|
| £16,000 | £892 | £858 | -£34 |
| £18,000 | £1,412 | £1,372 | -£40 |
| £20,000 | £1,932 | £1,892 | -£40 |
| £25,000 | £3,232 | £3,192 | -£40 |
| £29,527 | £4,409 | £4,369 | -£40 |
| £33,500 | £5,442 | £5,442 | +£0 |
The first January with an instalment
Below £1,000 of tax, HMRC collects the bill once a year. At £20,000 the bill is £1,932, so the system switches to advance payments. Someone who began trading in 2026/27 pays the full bill by 31 January 2028 and, in the same transfer, half of it again (£966) towards the next year. The second half follows on 31 July 2028. That double January catches many new sole traders off guard, and it is the reason a modest profit can still mean a four-figure payment in one go. The payments on account calculator shows the sequence for any bill.
Monthly set-aside for a £20,000 year
Spread evenly, the £1,932 bill is £161 a month. In a first year with payments on account the target is closer to £241, so that the January payment is covered. Every pound of extra profit between £12,570 and £50,270 costs 26 %, so a personal trainer who adds a few evening clients can set aside that share of the new money and leave the rest alone. Allowable costs work in reverse at the same rate.