A Self-Assessment is the name of the tax collection system used by HMRC to collect Income Tax and National Insurance from people with untaxed income. These are people who aren't paid like standard employees who have tax automatically deducted from their wages.
That's why it's called a "Self-Assessment": the responsibility to calculate and report your earnings, allowable business expenses, and tax reliefs lies with you, rather than HMRC (although an accountant can do these things for you).
- The tax year ends5 Apr 2026It started on 6 April 2025
- Register by5 Oct 2026If it's your first tax return
- Send your return and pay by31 Jan 2027Any tax you owe is due that day
A Self-Assessment is a concern for anyone who is self-employed, meaning they have earned money outside of a wage (untaxed income).
You are generally regarded as self-employed if you make any income outside traditional employment, and you must file a Self-Assessment tax return if that income exceeds £1,000 during a tax year (from the 6th of April of one year to the 5th of April the next year).
If it's the first time you're filing a tax return, you have to register for a Self-Assessment by the 5th of October after the end of that tax year.
When you do so, you'll receive a 10 digit 'Unique Taxpayer Reference' (UTR) which is used to link you to your tax records and tax payments. It will also be needed by your accountant to file returns on your behalf.
Self-Assessment for subcontractors under CIS
If you work as a subcontractor under the Construction Industry Scheme (CIS) you will have 20% deducted from the labour part of your invoices – which goes to HMRC (30% if you haven't registered for CIS). These deductions are not your tax payments in themselves, rather advance payments to cover your tax liability which is calculated at the end of the tax year.
Think of it like HMRC collecting money to fill up a bank account in your name, from which they'll subtract your tax liability for the year, and if anything is left over in the account once all your tax bills have been taken from it, you get the remainder back.
If you get a refund, this means that the deductions on your invoices throughout the year resulted in an overpayment to HMRC, netting you some money back.
On the other hand, if the sum of the deductions on your invoices for the year were less than your tax liability for the year, you will have underpaid HMRC and will need to pay a tax bill to cover the difference.
So how is Self-Assessment tax calculated?
- Add up all your taxable income for the tax year. This includes income from self-employment, employment, property rental, dividends, bank interest, and pensions.
- Subtract relevant business expenses, allowances, pension contributions and charitable donations that qualify for tax relief.
- Subtract the personal allowance of £12,570.
The figure you are left with at this stage is the total income on which tax is due. Now you will calculate how much you owe HMRC.
- Apply income tax rates to that figure:
- Basic rate: the first £37,700 (20%)
- Higher rate: £37,701 to £125,140 (40%)
- Additional rate: anything over £125,140 (45%)
- Add National Insurance Contributions (NICs). If you're self-employed, that's 6% of your profit between £12,570 and £50,270, and 2% of anything above that.
- Add Student Loans / other charges.
The figure you now have represents the total tax that is owed to HMRC.
- Deduct any tax you have already paid e.g. PAYE from employment, or CIS deductions.
You are now left with the Final Balancing Figure. This is what you will actually need to pay to HMRC or what will be refunded to you.
Note: You'll often see the basic rate written as £12,571 to £50,270, and the higher rate as £50,271 to £125,140. They're the same bands, counted before the personal allowance is taken off. Your personal allowance shrinks once your income is over £100,000, and Scotland has its own income tax bands.
| 1Income for the year | £40,000.00 |
|---|---|
| 2Business expenses | −£6,000.00 |
| 3Personal allowance | −£12,570.00 |
| Income that tax is due on | £21,430.00 |
| 4Income tax at 20% | £4,286.00 |
| 5National Insurance at 6% | £1,285.80 |
| 6Student loan (none here) | £0.00 |
| Total tax owed to HMRC | £5,571.80 |
| 7CIS already taken off | −£8,000.00 |
| Final balancing figure: paid back to them | £2,428.20 |
The same made-up plasterer as in our CIS guide, for the 2026 to 2027 tax year.
This guide gives general information only. Tax rules change and every business is different, so speak to us before acting on it. Rules and figures checked in November 2026.
Your tax return and yearly CIS refund claim come with our Tradies package, from £30 a month.
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