Working for yourself means no employer takes tax from your pay. Instead, you work out what is owed, report it and pay it, and both the US and the UK expect payments during the year, not only at the end. This guide sets out each system's forms, rates and deadlines, with worked examples, then compares them side by side.
The two systems at a glance
| United States | United Kingdom | |
|---|---|---|
| Main return | Form 1040 with Schedule C | Self Assessment return |
| Social security-type tax | 15.3% self-employment tax | Class 4 National Insurance, 6% and 2% |
| Payments during the year | Four estimated payments | Two payments on account |
| Quarterly reporting | None | Making Tax Digital above the threshold |
| Annual deadline | Mid-April for most filers | 31 January online |
United States
Who has to file
The IRS says self-employment tax applies when "net earnings from self-employment ... were $400 or more" (IRS). Freelance and sole-proprietor income is reported on Schedule C with Form 1040, and self-employment tax is worked out alongside it.
Self-employment tax
The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. It replaces the share an employer would otherwise pay on wages. For 2026, the Social Security part applies to the first $184,500 of combined wages, tips and net self-employment earnings. The IRS also allows a deduction for "the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income."
Example. On $50,000 of net profit, 15.3% would be $7,650. The calculation on Schedule SE applies the rate to slightly less than net profit, so the actual figure is a little lower. Income tax is due on top, at the filer's own rates after deductions.
Forms that report income
Clients and platforms may report payments to the IRS. A payment app or online marketplace sends Form 1099-K when payments for goods or services "total over $20,000 in more than 200 transactions", while card processors send one regardless of amount (IRS). Income is taxable whether or not a form arrives.
Estimated payments
Individuals generally have to make estimated payments if they expect to owe at least $1,000 when they file. The IRS divides the year into four periods (IRS estimated tax FAQ):
| Income earned | Payment due |
|---|---|
| 1 January – 31 March | 15 April |
| 1 April – 31 May | 15 June |
| 1 June – 31 August | 15 September |
| 1 September – 31 December | 15 January of the following year |
A due date that falls on a weekend or legal holiday moves to the next business day.
The safe harbour. The IRS says most taxpayers avoid an underpayment penalty if they pay at least 90% of this year's tax, or 100% of last year's, whichever is smaller. If last year's adjusted gross income was over $150,000 ($75,000 if married filing separately), the prior-year figure is 110% (IRS). Paying a quarter of last year's total tax on each date is a common way to stay inside it.
Software
Commercial software usually puts Schedule C in its paid tiers. TaxAct's Self-Employed tier was $109.99 for the 2026 filing season, and TurboTax's free edition excludes 1099-NEC and business income. IRS Free File offers guided software for adjusted gross income of $95,000 or less; its page says it reopens in January 2027. Our US tax software comparison has the details.
United Kingdom
Registering and the trading allowance
Sole traders who need to file must tell HMRC by 5 October after the end of the tax year in which they started. Very small trading income may not need reporting: the trading allowance is "a tax exemption of up to £1,000 a year" (gov.uk).
Deadlines
For the 2025–26 tax year, which ended on 5 April 2026, gov.uk sets these deadlines (gov.uk):
- Paper return: 11:59pm on 31 October 2026 (now passed)
- Online return: 11:59pm on 31 January 2027
- Tax payment: 11:59pm on 31 January 2027
Income Tax and Class 4 National Insurance
Profits are taxed at the normal Income Tax rates. For 2026–27 in England, Wales and Northern Ireland, the Personal Allowance is £12,570, the basic rate 20% up to £50,270, the higher rate 40% up to £125,140 and the additional rate 45% above (gov.uk). Scotland has its own bands.
Class 4 National Insurance is 6% on profits from £12,570 to £50,270 and 2% above (gov.uk). Class 2 contributions are treated as paid once profits reach £7,105, so most sole traders no longer pay them.
Example for 2026–27. A sole trader in England with £40,000 of profit and no other income:
| Calculation | Amount | |
|---|---|---|
| Income Tax | (£40,000 − £12,570) × 20% | £5,486.00 |
| Class 4 National Insurance | (£40,000 − £12,570) × 6% | £1,645.80 |
| Total | £7,131.80, about 17.8% of profit |
Payments on account
Gov.uk says payments on account are advance payments towards the next bill, each half of the previous year's tax, due by 31 January and 31 July. They are not needed if last year's bill was under £1,000, or if more than 80% of it was paid at source.
The first-year jump. In the example, the first January after the trader's first year would bring the year's £7,131.80 plus the first payment on account for the next year, £3,565.90: £10,697.70 in one payment. Setting money aside from the first month avoids a shortfall.
Making Tax Digital for Income Tax
From 6 April 2026, sole traders and landlords with qualifying income over £50,000 in 2024–25 must keep digital records and send quarterly updates through compatible software. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028 (gov.uk).
| Update covers (from the start of the tax year) | Update due |
|---|---|
| 6 April – 5 July | 7 August |
| 6 April – 5 October | 7 November |
| 6 April – 5 January | 7 February |
| 6 April – 5 April | 7 May |
Each update covers the year to date, so the fourth one covers the whole tax year.
Gov.uk describes the updates as "summaries, not tax returns": a return is still submitted after the year ends. HMRC will not apply penalty points for late quarterly updates in 2026–27, though late returns still count (gov.uk). Gov.uk notes that free compatible products exist for simple tax affairs, with limits, and that HMRC does not recommend any product.
Penalties
| Late return | Penalty |
|---|---|
| Missed deadline | £100 |
| After 3 months | £10 a day, up to £900 |
| After 6 months | 5% of the tax due or £300, whichever is greater |
| After 12 months | Another 5% or £300, whichever is greater |
Paying late adds separate penalties of 5% of the unpaid tax at 30 days, six months and twelve months (gov.uk).
Side by side
| US | UK | |
|---|---|---|
| Threshold to start | $400 of net SE earnings | Trading income over £1,000 |
| Social security-type tax | 15.3% up to the wage base, then 2.9% | Class 4: 6% to £50,270, then 2% |
| During the year | Four estimated payments | Payments on account, January and July |
| Quarterly reporting | Not required | Making Tax Digital above threshold |
| Safety net | Safe harbour on last year's tax | No payments on account under £1,000 |
Setting money aside
Neither system takes tax at source, so the money has to be kept back from each payment received. The worked examples give a starting point: about 17.8% of profit for the UK example, and 15.3% self-employment tax plus income tax in the US. A separate account for tax money keeps it from being counted as spending money; our guide to budgeting methods covers budgeting on irregular income.
Software
Our US tax software comparison and UK Self Assessment software comparison cover prices, and the tax software price finder has a US and a UK edition.
Recap
- US self-employment tax is 15.3% on net earnings of $400 or more, and half of it is deductible when working out adjusted gross income.
- US estimated payments are due 15 April, 15 June, 15 September and 15 January, if at least $1,000 is expected to be owed.
- UK sole traders pay Income Tax and Class 4 National Insurance of 6% on profits from £12,570 to £50,270 and 2% above.
- UK payments on account are each half of last year's bill, due 31 January and 31 July, so the first year can bring a large January payment.
- Making Tax Digital requires quarterly updates from April 2026 for qualifying income over £50,000, falling to £30,000 in 2027 and £20,000 in 2028.
- Both systems charge penalties for late filing and late payment, so the deadlines matter as much as the amounts.
Sources
Read on or before 4 November 2026. Rates and rules change; the source page is the current version.