By profit
Tax and loan repayments on £40,000 of self-employed profit
A comfortable basic-rate year south of the border, a few thousand pounds short of the higher rate in Scotland.
A £40,000 profit in 2026/27 costs a sole trader in England, Wales or Northern Ireland £7,132 through Self Assessment, £5,486 of it Income Tax and £1,646 Class 4, for a take-home of £32,868. In Scotland the bill is £7,197, now a little above the rest of the UK, and the gap is about to widen: the Scottish higher rate of 42 % begins at £43,663, only £3,663 further up. A graduate repaying a Plan 2 student loan adds £955 to the January payment, as 9 % is collected on income above £29,385, which lifts the cost of each extra pound of profit from 26 % to 35 %. The company question tends to surface at this level. On current rates, a one-person company paying out everything would leave £1,235 less than trading alone, before any accountancy fee.
Self Assessment bill 2026/27
£7,132
Put aside 17.8 % of your profit · next £100 of profit costs 26.0 %
| Profit | £40,000 |
| Income Tax | £5,486 |
| Class 4 National Insurance | £1,646 |
| Class 2 | treated as paid |
| Kept from your profit | £32,868 |
When you pay, if 2026/27 is your first year
| 31 January 2028: bill + first payment on account | £10,698 |
| 31 July 2028: second payment on account | £3,566 |
Each payment on account is half of £7,132 (Income Tax and Class 4, loans excluded). How payments on account work
Making Tax Digital at this turnover
Turnover of £40,000 is over the £30,000 test. If your 2025/26 return showed income like this, quarterly updates start on 6 April 2027. Check your start date
Figures checked by Radif Partners · Editorial policy · How we calculate
A loan repayment on top of the tax
Employees see student loan deductions on their payslip. Sole traders meet them once a year, inside the Self Assessment calculation. For Plan 2, the deduction is 9 % of income over £29,385, and at £40,000 that comes to £955, taking the January bill to £8,087. Two details trip people up. The loan is collected with the balancing payment, so it does not swell the payments on account. And because it is charged on the same profit as the tax, every pound earned above the threshold now carries three deductions: 20 % Income Tax, 6 % Class 4 and 9 % loan. The student loan page covers Plans 1, 4 and 5 and the postgraduate loan.
| Profit | Tax and Class 4 | Plan 2 repayment | Total rUK | Total Scotland |
|---|---|---|---|---|
| £36,000 | £6,092 | £595 | £6,687 | £6,712 |
| £38,000 | £6,612 | £775 | £7,387 | £7,432 |
| £40,000 | £7,132 | £955 | £8,087 | £8,152 |
| £42,000 | £7,652 | £1,135 | £8,787 | £8,872 |
| £43,663 | £8,084 | £1,285 | £9,369 | £9,471 |
| £46,000 | £8,692 | £1,495 | £10,187 | £10,803 |
£3,663 short of the Scottish 42 % band
A Scottish electrician on £40,000 pays 27 % on the next pound of profit, the intermediate rate plus Class 4. At £43,663 that becomes 48 %, because Scotland's higher rate starts well before the UK upper profits limit of £50,270, and Class 4 stays at its main rate until that limit. Between the two figures sits the most expensive stretch of profit for a Scottish sole trader below six figures. South of the border the same electrician keeps paying 26 % on each pound until £50,270. Anyone in Scotland expecting a jump in profit can see the effect in the calculator by switching the region; the Scottish tax page explains the bands.
Sole trader or company at forty thousand
The comparison usually assumes the owner pays a small salary and takes the rest as dividends. At £40,000 the best salary in this model is £12,570. After Corporation Tax at the small profits rate of 19 % and dividend tax, the director keeps £31,633; the sole trader keeps £32,868. The difference of £1,235 runs against the company even before its accounts, filing and payroll costs are counted. Even at its closest, around £60,000 of profit, a company paying out everything only draws level; what changes the picture is money left inside the business, as the side-by-side comparison shows.
Funding the January payment
A settled business at this level pays in two halves, each £3,566, on 31 January 2028 and 31 July 2028, with any loan repayment added in January. A first-year trader pays £11,653 in that first January if a Plan 2 loan is running. Setting aside £971 a month from April, in an account kept apart from day-to-day spending, would cover it.