Self-employed basics: revenue, allowable expenses and profit

Profit is the taxable figure

Sole traders are taxed on profit: business revenue less allowable business expenses. Money you take out of the business for yourself is not an expense, and it does not change the tax due.

That is why our calculator asks for revenue and expenses separately, and shows taxable profit before applying any tax.

Allowable expenses

An expense is generally allowable when it is incurred wholly and exclusively for the business. Mixed-use costs may need apportioning, and some costs follow specific rules such as capital allowances or simplified flat rates.

This calculator does not decide what is allowable for you. Enter the figure you or your accountant believe is correct; whether a specific cost qualifies depends on your circumstances.

Payments on account

Self-assessment often requires two payments on account towards the following year, alongside any balancing payment. Our calculator shows an indicative payment-on-account figure so the cash-flow shape is visible, but HMRC's statement is the authoritative amount.

Calculators for this topic

• Self-employed tax calculatorEstimate income tax and Class 2/4 National Insurance on trading profit.
• Contractor day rate calculatorEstimate the day rate needed to reach a target take-home as a sole trader.