How a Self Assessment calculation works
Your tax return brings together every source of taxable income for the tax year, which for this calculator is 6 April 2026 to 5 April 2027. HMRC works out the tax on the total, adds Class 4 National Insurance if you are self-employed, and then takes off tax you have already paid, mainly PAYE on a job or pension. Whatever is left is collected through Self Assessment.
The calculation follows a fixed order:
- Add up income. Employment and pension income (the taxable pay on your P60), self-employed profit, rental profit, savings interest and dividends;
- Deduct the personal allowance. £12,570, reduced by £1 for every £2 of adjusted net income above £100,000;
- Tax non-savings income first. Earnings, profits and rent are taxed at 20%, 40% and 45% (or the six Scottish rates if you are a Scottish taxpayer);
- Then savings, then dividends. They sit on top and use the UK bands, with the personal savings allowance and the £500 dividend allowance;
- Apply reliefs. Pension contributions and Gift Aid extend your basic rate band, and residential mortgage interest gives a 20% tax reduction;
- Add Class 4 and take off tax paid. The result is your balancing payment.
Rates used for 2026/27
| Item | 2026/27 |
|---|---|
| Personal allowance | £12,570 |
| Basic rate (20%) | First £37,700 of taxable income |
| Higher rate (40%) | £37,701 to £125,140 |
| Additional rate (45%) | Above £125,140 |
| Dividend rates | 10.75%, 35.75% and 39.35% |
| Class 4 National Insurance | 6% on profits £12,570 to £50,270, 2% above |
Dividend tax went up by 2 percentage points at the basic and higher rates from 6 April 2026. Savings income is still taxed at 20%, 40% and 45% in 2026/27. Class 2 National Insurance is no longer charged: if your profits are £7,105 or more, Class 2 is treated as paid, and below that you can choose to pay voluntarily.
Payments on account
If your Self Assessment bill is large enough, HMRC also asks for two advance payments towards the following year. Each is 50% of the "relevant amount": your income tax and Class 4 for the year, less tax deducted at source. For the 2026/27 return they are payments towards 2027/28, due on 31 January 2028 and 31 July 2028.
You do not have to make payments on account if either:
- The relevant amount is under £1,000. The threshold has been £1,000 since 2009/10;
- More than 80% of your tax was collected at source. For example, an employee whose PAYE covers most of the bill and who only owes a little on some rental income.
Capital Gains Tax and student loan repayments are never included in payments on account. They are paid in full with the balancing payment. In your first year in Self Assessment, you pay the whole bill and the first payment on account together in January, which is why that bill can feel like 18 months' tax at once.
Budget 2026 (28 October 2026) announced that from April 2029 people who make payments on account will instead pay smaller, more regular amounts during the year. The details are still being consulted on, and nothing changes for the 2026/27 and 2027/28 payments shown here.
Worked example
A sole trader makes a profit of £45,000 in 2026/27, earns £2,000 of bank interest and pays £4,000 into a personal pension. The pension provider adds basic rate relief, so the gross contribution is £5,000, and this extends the basic rate band to £42,700. They made no payments on account for 2026/27.
| Step | Amount |
|---|---|
| Profit less £12,570 personal allowance, taxed at 20% | £6,486.00 |
| Interest: £1,000 personal savings allowance, £1,000 at 20% | £200.00 |
| Class 4: 6% of (£45,000 − £12,570) | £1,945.80 |
| Total for 2026/27 (balancing payment) | £8,631.80 |
| First payment on account for 2027/28 | £4,315.90 |
| Due by 31 January 2028 | £12,947.70 |
| Second payment on account, due 31 July 2028 | £4,315.90 |
Enter the same figures in the calculator above and you will get the same result. If their profit falls in 2027/28, they can ask HMRC to reduce the payments on account, but HMRC charges interest if they reduce them too far.
What this calculator does not cover
- Capital Gains Tax. Gains are reported on the same return but taxed separately; use our CGT calculator;
- Student loan repayments and the High Income Child Benefit Charge. Both can be collected through Self Assessment and will add to the bill;
- Losses, partnership income and foreign income. These need their own computation;
- Pension savings over the annual allowance. Any annual allowance charge is added to your income tax;
- Marriage allowance, blind person's allowance and other reliefs. These reduce the bill but are not modelled;
- Interest and penalties. The estimate assumes you file and pay on time.
Getting your return right
An estimate helps you put money aside, but the figure on your return has to be exact. Our Self Assessment tax return service prepares and files returns for employees with extra income, landlords and the self-employed, and checks whether your payments on account can be reduced. If you trade on your own account, see our accountants for sole traders, or use the self-employed tax calculator to look at your profit alone.