Self-employed versus employed calculator
The same money earned two ways is taxed differently, and the gap is not where most people think it is. Employment is the more expensive option once the employer's costs are counted, and the cheaper one once the risk is.
That is £35,920 a year after income tax, National Insurance and anything else coming off your pay.
- Income tax
- £6,486
- National Insurance
- £2,594
- Effective rate
- 20.2%
- Marginal rate
- 28.0%
| Year | Month | Week | Hour | |
|---|---|---|---|---|
| Gross pay | £45,000.00 | £3,750.00 | £865.38 | £23.08 |
| Income tax | £-6,486.00 | £-540.50 | £-124.73 | £-3.33 |
| National Insurance | £-2,593.92 | £-216.16 | £-49.88 | £-1.33 |
| Take-home pay | £35,920.08 | £2,993.34 | £690.77 | £18.42 |
Employed against self-employed on the same income
| Amount | Employed take-home | Employer also pays | Self-employed after tax and Class 4 |
|---|---|---|---|
| £20,000 | £17,920 | £2,250 | £18,068 |
| £30,000 | £25,120 | £3,750 | £25,468 |
| £45,000 | £35,920 | £6,000 | £36,568 |
| £60,000 | £45,358 | £8,250 | £46,111 |
| £90,000 | £62,758 | £12,750 | £63,511 |
| £120,000 | £76,158 | £17,250 | £76,911 |
Self-employment pays Class 4 National Insurance at 6% between the Lower Profits Limit and the Upper Profits Limit and 2% above, against an employee's 8% and 2%, plus Class 2 where profits are above the small profits threshold. That is the whole of the take-home advantage, and it is smaller than the folklore suggests.
Set against it: no holiday pay, no sick pay, no employer pension contribution, no redundancy rights, and the employer National Insurance in the third column is money that simply does not exist in the self-employed version. On a £45,000 salary an employer is spending £6,000 that a self-employed person has to generate themselves.
What you have to provide yourself
Twenty-eight days of holiday, worth about 12% of your working year. A pension, where an employer would have contributed at least 3% and often much more. Sick pay beyond nothing. Equipment, insurance, accounting. Time spent finding the next piece of work, which is unpaid and often substantial.
The honest comparison is not take-home against take-home. It is take-home plus everything an employer provides, against take-home plus nothing.
Questions people actually ask
Do self-employed people pay less tax?
Slightly less National Insurance — 6% rather than 8% on the main band — and the same income tax. The larger differences are what you can deduct as expenses and what you have to provide for yourself.
Should I go self-employed?
Not for the tax alone; the gap is not large enough to justify it. The reasons that hold up are control, rate and the type of work.
Related
Figures on this page are for the 2026/27 tax year (6 April 2026 to 5 April 2027) and were last checked on 29 August 2026. Every rate we use is listed on the sources page.