Self-employed tax calculator

Easily calculate how much Income Tax and National Insurance you owe on your earnings if you’re self-employed.

What does it mean to be self-employed?

It is important to know whether you are self-employed or employed as it affects how you pay tax. When you’re employed i.e. you work for a company on a permanent basis, you’re taxed on a system known as Pay As You Earn (PAYE). This means that the Income Tax and National Insurance you owe is deducted from your wages by your employer before you’re paid. If you’re self-employed, the system is different. You don’t have an employer to deduct the taxes you owe automatically so you have to sort it out yourself. You declare your untaxed income and pay tax via a tax return.

If you are employed and have freelance commitments on the side, or even your own side business, you are seen as being both employed and self-employed. So you’re taxed both automatically through PAYE and manually via a tax return.

How am I taxed?

Your income tax is based on your total income. If you have a side income, it’s everything from your employer plus your profit from your side income. While your employment income is taxed monthly through PAYE, your side income is taxed when you submit your tax return.

Consider someone earning £15,000 from employment and £5,000 from their side income: The income tax bands for 2022 to 2023 are:

• • Their tax allowance is applied (in full) to the first £12,570 of their income, they pay 0% on that.
• • The remaining £2,430 of their income is taxed at 20% in the basic rate band - that’s £486.
• • The £5,000 of side hustle income also falls in the basic rate band and is taxed at 20% - that’s £1,000.
• • Their total income tax is £486 + £1,000 = £1,486.

Do I also need to pay National Insurance?

You will also pay National Insurance Contributions (NICs) if you earn over a certain amount on Etsy. Depending on your profit, you might need to pay Class 2 and Class 4 National Insurance.

For Class 2, your tax is based on the number of weeks you’ve worked on your business.

• • For Class 2, you pay £3.05 a week if you earned more than £6,725 in profits

Class 4 is calculated in the same way as income tax. You pay the following on your profits:

• • Nothing on your first £11,909
• • 10.25% on any profit earned between £9,568 and £50,270
• • 3.25% on any profit earned above £50,270

Do keep in mind that the below numbers are based on the 2022/2023 tax year.

I’ve used the calculator and I would like to submit my tax return!

That’s awesome! You can submit your tax return with Earnr in minutes. All you need to do is download the app here and follow the steps there. If you need any additional help, please feel free to contact one of our friendly team members, either from within the app or via email [email protected]