Personal Tax Return
If you are self-employed, you can deduct allowable business expenses when calculating your taxable profit.
Common allowable expenses can include:
Do I have to file Self-Assessment tax Return?
You must send a Self Assessment tax return if, during the tax year 2026/27, any of the following apply to you:
- You were self-employed as a sole trader and your gross trading income was more than £1,000.
- You were a partner in a business partnership.
- You had to pay Capital Gains Tax when you sold or disposed of an asset that had increased in value.
- You had to pay the High Income Child Benefit Charge and are required to deal with it through Self Assessment.
- You were an off-payroll worker who is repaying a student or postgraduate loan.
- You had other untaxed income, such as:
- Rental income.
- Tips and commission.
- Savings interest.
- Investment income.
- Dividend income.
- Foreign income.
The £1,000 threshold for sole traders is based on gross income before deducting allowable expenses.
You may also choose to complete a Self Assessment return in certain circumstances, for example, to claim specific tax reliefs or prove self-employed status.
If you are required to file for the first time, you normally need to notify HMRC by 5 October following the end of the tax year.
How much TAX do I have to pay?
The amount of Income Tax you pay depends on your taxable income and the tax bands that apply to you.
For 2026/27, the standard Personal Allowance is £12,570. This means you normally do not pay Income Tax on the first £12,570 of your income.
For taxpayers in England, Wales and Northern Ireland, the main Income Tax rates for 2026/27 are:
Tax Rates 2026/27
Brand
Personal Allowance
Basic Rate
Higher Rate
Additional Rate
Taxable income
Up to £12,570
£12,571 to £50,270
£50,271 to £125,140
Over £125.140
Tax rate
0%
20%
40%
45%
These figures assume you are entitled to the standard £12,570 Personal Allowance.
Scottish taxpayers have different Income Tax bands and rates, although the Personal Allowance remains £12,570.
What is Personal Allowance?
The Personal Allowance is the amount of income you can normally receive before paying Income Tax.
For the 2026/27 tax year, the standard Personal Allowance is:
£12,570
However, your Personal Allowance may be reduced if your adjusted net income is more than £100,000.
What happens when my Income goes over £100k?
If your adjusted net income is above £100,000, your Personal Allowance starts to reduce.
For every £2 of adjusted net income above £100,000, you lose £1 of Personal Allowance.
This means your Personal Allowance is reduced to £0 once your adjusted net income reaches £125,140.
Having income above £100,000 does not automatically mean you must file a Self Assessment tax return. Whether you need to file depends on your individual circumstances and other reasons for filing.
Class 2
£3.65 a week
Class 4
6% on profits between £12,570 and £50,270
2% on profits over £50,270
Do I have to pay National Insurance?
If you are self-employed, the amount of National Insurance you pay depends on your taxable profits.
From 6 April 2026, the rules for self-employed National Insurance are:
- Class 2 National Insurance
If your self-employed profits are more than £7,105, you may have to pay Class 2 National Insurance.
For 2026/27:
- Rate per week £3.65
- Class 4 National Insurance
Profit Level | Class 4 Rate |
Up to £12,570 | 0% |
£12,571 to £50,270 | 6% |
Over £50,270 | 2% |
Most self-employed people pay their Class 4 National Insurance through Self Assessment.
How do I pay National Insurance?
Most self-employed people pay their Class 4 National Insurance through their Self Assessment tax return.
You should tell HMRC when you become self-employed as a sole trader or start operating as a business partnership.
Some occupations have special National Insurance rules, including certain examiners, moderators, invigilators, ministers of religion and people who make investments.
Special rules for specific jobs:
Some self-employed people do not pay National Insurance through Self Assessment, but may want to pay voluntary contributions. These are:
- Examiners, moderators, invigilators and people who set exam questions
- Ministers of religion who do not receive a salary or stipend
- People who make investments for themselves or others - but not as a business and without getting a fee or commission
What expenses can I claim as Self Employed?
If you are self-employed, you can deduct allowable business expenses when calculating your taxable profit.
Common allowable expenses can include:
- Office costs, such as stationery and business phone costs.
- Business travel, including qualifying fuel, parking, train and bus costs.
- Business insurance.
- Staff costs, including salaries and certain subcontractor costs.
- Stock and raw materials.
- Bank charges and other qualifying financial costs.
- Business premises costs, such as heating, lighting and business rates.
- Advertising and marketing costs.
- Website and certain software costs.
- Professional fees and Training directly related to your business.
Only expenses that are wholly and exclusively for business purposes can generally be claimed.
If you use the £1,000 trading allowance, you cannot also deduct your actual business expenses against that income.
What are the Simplified Expenses? Who can use them?
Simplified Expenses allow eligible self-employed people to calculate certain business expenses using flat-rate amounts instead of calculating the exact cost.
They can make record-keeping easier where calculating actual costs would be complicated.
Simplified expenses can be used by:
- Sole traders
- Business partnerships where none of the partners is a limited company
They can cover certain:
- Vehicle expenses
- Working-from-home expenses
- Living expenses where you live in business premises
The simplified-expense rules do not apply to every type of business expense, so you should check whether the flat-rate method is appropriate for your circumstances.
Do I have to pay Tax on Child Benefit?
The High Income Child Benefit Charge (HICBC) can apply if you or your partner receives Child Benefit and one of you has adjusted net income above £60,000.
For the 2026/27 tax year:
- The charge starts when adjusted net income exceeds £60,000
- The charge increases by 1% of the Child Benefit received for every £200 of adjusted net income above £60,000
- The full amount of Child Benefit is effectively recovered when adjusted net income reaches £80,000
The charge is based on the higher-income individual, rather than combined household income.
In some circumstances, the charge can now be dealt with through PAYE rather than Self Assessment, so not everyone affected necessarily needs to complete a tax return.
What is Gift Aid?
Gift Aid allows eligible charities and Community Amateur Sports Clubs (CASCs) to claim an additional 25p from HMRC for every £1 you donate, provided you meet the relevant conditions.
For example, if you donate £100 through Gift Aid, the charity can generally claim an additional £25.
Can I get tax relief on Gift Aid?
If you are a higher-rate or additional-rate taxpayer, you may be able to claim additional Income Tax relief on qualifying Gift Aid donations.
You can normally claim the relief:
- Through your Self Assessment tax return
- Or, in some circumstances, by asking HMRC to amend your tax code
Gift Aid can therefore reduce the amount of income on which you pay tax at your higher or additional rate.
What is Dividend?
A dividend is a payment made by a company to its shareholders from profits available for distribution.
Dividends are generally taxed differently from employment or self-employed income and do not normally attract National Insurance.
Can I get dividend allowance?
Yes.
For the 2026/27 tax year, the Dividend Allowance is £500.
You do not pay Dividend Tax on dividends covered by your Dividend Allowance, although the dividends still count towards determining which Income Tax band applies to you.
Tax Year
2026/2027
2025/2026
2024/2025
2023/2024
Dividend Allowance
£500
£500
£500
£1000
How much tax to pay on Dividend income?
For 2026/27, dividend income above the £500 Dividend Allowance is taxed according to your Income Tax band.
Tax Band
Tax rate on dividends over the allowance
Basic Rate
10.75%
Higher rate
35.75%
Additional rate
39.35%
These rates apply from 6 April 2026 to 5 April 2027.
Your dividend income is added to your other taxable income to determine which tax band applies.
For example, if your salary already uses most of your basic-rate band, some or all of your dividends may be taxed at the higher dividend rate.
Example
You get £3,000 in dividends and earn £29,570 in wages in the 2026 to 2027 tax year.
This gives you a total income of £32,570.
You have a Personal Allowance of £12,570. Take this off your total income to leave a taxable income of £20,000.
This is in the basic rate tax band, so you would pay:
- 20% tax on £17,000 of wages
- No tax on £500 of dividends, because of the dividend allowance
- 10.75% tax on £2,500 of dividends
Capital Gains Tax:
Capital Gains Tax (CGT) is a tax on the profit you make when you dispose of an asset that has increased in value.
You may potentially have a Capital Gains Tax liability when you:
- Sell an asset.
- Give an asset away.
- Exchange an asset for something else.
- Receive compensation for an asset.
You normally pay tax on the gain, rather than the total amount you receive from selling the asset.
Some assets and disposals are exempt from Capital Gains Tax.
How much is the Capital Gain Tax Rate?
It depends on which tax band you were in for the relevant tax year.
- If you capital gain amount is within the basic Income Tax band, you’ll pay 10% on your gains (or 18% on residential property and carried interest.
- If you’re a higher or additional rate taxpayer you’ll pay:
- 24% on your gains from residential property
- 28% on your gains from ‘carried interest’ if you manage an investment fund
- 20% on your gains from other chargeable assets
What is Capital Gain Allowance?
The Annual Exempt Amount is the amount of taxable capital gains an individual can make before Capital Gains Tax becomes payable.
For 2026/27, the Annual Exempt Amount is:
£3,000
This is unchanged from 2025/26.
Capital Gains Annual Exempt Amount
Tax Year | Annual Exempt Amount |
2026/27 | £3,000 |
2025/26 | £3,000 |
2024/25 | £3,000 |
2023/24 | £6,000 |
2022/23 | £12,300 |
What is the Foreign Income and Gains (FIG) regime?
The old remittance basis rules have been abolished.
From 6 April 2025, the UK introduced the Foreign Income and Gains (FIG) regime. UK tax residents are generally taxed on their worldwide income and gains under the arising basis, subject to available reliefs.
The FIG regime can provide relief for certain foreign income and gains for qualifying new UK residents.
You may qualify if:
- You are UK tax resident under the Statutory Residence Test
- You are within your first 4 tax years of UK residence
- You were non-UK resident for at least 10 consecutive tax years before becoming UK resident
If you qualify and make a valid claim, eligible foreign income and gains arising during the qualifying period may benefit from UK tax relief.
The rules are significantly different from the former remittance basis, so professional advice is recommended where foreign income or gains are involved.
What is Double Taxation Agreement?
A Double Taxation Agreement (DTA) is a tax treaty between two countries designed to prevent or reduce the risk of the same income or gain being taxed twice.
If you are a UK tax resident and receive foreign income, the tax treatment can depend on:
- The type of foreign income
- The country where the income arises
- The relevant tax treaty
- Any UK foreign tax credit relief
- Whether you qualify for the Foreign Income and Gains regime
Similarly, if you are not UK resident but receive UK-source income, the applicable UK tax treatment may depend on domestic UK rules and any relevant DTA.
International tax rules can be complex, so professional advice is recommended if you have income, investments or assets in more than one country.
Seek Professional Advice
We understand that personal tax returns can feel complicated, especially when you have multiple sources of income, dividends, rental income, foreign income or capital gains.
At TX Accountants Ltd, we help individuals and business owners understand their tax obligations, prepare accurate Self Assessment tax returns and identify legitimate tax-planning opportunities while keeping you compliant with HMRC requirements.
Whether you are self-employed, receive dividends, have rental income, earn foreign income or have made capital gains, our team can help you understand your position and make informed decisions.
Let us take the stress out of your personal tax return.
Contact TX Accountants Ltd today to discuss your tax requirements and find out how we can help.
Company Formation
How you set up your business depends on what sort of work you do. It can also ...
Taking money out of a Limited Company
How you set up your business depends on what sort of work you do. It can also...
Company and Accounting records
You must keep records about the company itself, financial and accounting records...
PAYE and payroll for Employers
As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue...
How VAT works
VAT (Value Added Tax) is a tax added to most products and services sold by VAT- registered ...
Company Tax Returns
Your company or association must file a Company Tax Return if you get a notice to deliver a Company Tax Return...
Author...
Farhad Kabir
MSc AFA MIPA FCCA
Partner