Freelancer taxes in United Kingdom (2026).

Important context

Class 2 National Insurance was made voluntary from 6 April 2024: a self-employed person with profits at or above the £7,105 Small Profits Threshold is treated as having paid it and keeps the State Pension credit without paying anything, so it is not a levy and is not modelled. Below that threshold it can be paid voluntarily at £3.65 a week to protect the contribution record. THE 60% BRACKET IS NOT A TYPO. Above £100,000 of income the £12,570 Personal Allowance is withdrawn at £1 for every £2 earned, so each extra pound of income adds £1.50 to taxable income. That makes the true marginal rate 1.5 × 40% = 60% between £100,000 and £125,140, after which the allowance is gone and the rate returns to the headline 45%. Expressing it as a bracket on income-above-the-allowance reproduces the published tax exactly at every income: at £125,140 this schedule gives £42,516, which is what the published bands give on a zero Personal Allowance. Student loan repayments, the High Income Child Benefit Charge and VAT are all outside this model.

Important context

MODELLED ON THE STANDARD ARRANGEMENT, NOT ON YOUR OWN. The salary is fixed at the £12,570 Personal Allowance, which is what most UK accountants recommend for a sole director and which this model checked against the alternative of a £5,000 salary at the secondary threshold (that saves the employer’s NI but wastes personal allowance and comes out £463 worse at £60,000 of revenue). Employer’s National Insurance is charged in full because the £10,500 Employment Allowance is explicitly unavailable where a sole director is the only employee over the secondary threshold. The dividend rates rose by two points on 6 April 2026, to 10.75% and 35.75%, which is why this route now loses to sole trading at ordinary freelance incomes and only starts to pay off where profit is retained in the company rather than drawn. TWO SIMPLIFICATIONS: the Personal Allowance taper above £100,000 of total income is not modelled here (it is in the sole-trader schemes), so figures above roughly £100,000 of salary-plus-dividends read slightly low; and Scottish rates make no difference at this salary because £12,570 is covered by the allowance either way, while dividends are taxed at UK-wide rates wherever you live.

Important context

Scottish rates apply only to non-savings, non-dividend income, so trading profit and salary are taxed on this schedule while dividends, interest and capital gains stay on the UK-wide rates. National Insurance is reserved to Westminster and is identical. The crossover is around £28,900 of income: below it the 19% starter rate makes Scotland marginally cheaper, above it the 21% intermediate and 42% higher rates make it steadily dearer. THE 60% BRACKET IS NOT A TYPO. Above £100,000 of income the £12,570 Personal Allowance is withdrawn at £1 for every £2 earned, so each extra pound of income adds £1.50 to taxable income. That makes the true marginal rate 1.5 × 45% = 67.5% between £100,000 and £125,140, after which the allowance is gone and the rate returns to the headline 45%. Expressing it as a bracket on income-above-the-allowance reproduces the published tax exactly at every income: at £125,140 this schedule gives £47,701.55, which is what the published bands give on a zero Personal Allowance.