Last updated: 14 October 2026
How do you plan and save for tax when going freelance?
Set aside a fixed percentage of every payment you receive in a separate savings account, typically 20% to 30% depending on your expected profit, and budget for a first-year bill that may include payments on account towards the next year. As a freelancer, no tax is deducted from your income, so you pay income tax and Class 4 NIC through Self Assessment by 31 January after the end of the tax year. Registering early, keeping digital records and claiming all allowable expenses keeps the bill under control.
How much to set aside in 2026/27
| Expected annual profit | Approximate tax and Class 4 NIC | Suggested savings rate |
| £20,000 | £1,932 | 10% |
| £35,000 | £5,832 | 17% |
| £50,000 | £9,732 | 20% |
| £75,000 | £20,189 | 27% |
Figures assume no other income and England, Wales or NI rates.
The first-year cash flow shock
If your first tax bill is over £1,000, you’ll pay the year’s tax plus a first payment on account of 50% towards the next year on 31 January, then another 50% on 31 July. In practice, you can owe 150% of a year’s tax in your first January.
Example
Chloe leaves her job in April 2026 to freelance as a copywriter. She expects £40,000 profit in 2026/27. Her income tax at 20% and Class 4 NIC at 6% on £27,430 above the Personal Allowance come to about £7,132. On 31 January 2028, she owes £7,132 plus a £3,566 payment on account, £10,698 in total, with another £3,566 due by 31 July 2028. She saves 25% of every invoice in her first year, so the money is ready.
Practical steps
- Register for Self Assessment as soon as you start
- Open a separate business bank account and a tax savings account
- Use accounting software that links to your bank
- Claim expenses: equipment, software, a share of home costs, professional fees
- Check whether MTD for Income Tax applies (income over £50,000 from April 2026, £30,000 from April 2027)
Pensions
Without an employer pension, set up a personal pension or SIPP. Contributions get tax relief and reduce your adjusted net income.
Should you set up a company?
At higher profits, a limited company may save tax through a mix of salary and dividends, but costs and admin are higher, and dividends were taxed more from April 2026.
Common mistakes
- Spending money that’s needed for tax
- Forgetting payments on account
- Not registering by 5 October
- Underestimating NIC
Using your savings pot
Keep the tax savings in an easy access account in your own name, separate from the business account, and don’t dip into it for business spending. The interest it earns is taxable, but usually falls within your Personal Savings Allowance. Review the percentage you set aside each quarter, since your profit may be higher or lower than expected, and adjust before the bill arrives.
Frequently asked questions
Can I pay tax monthly?
Yes, through HMRC’s budget payment plan.
Do I need an accountant?
Not required, but useful.
Can I reduce payments on account?
Yes, if your income falls.
Do I still pay Class 2 NIC?
No, it’s no longer payable for most.
Related: freelance income while employed, what self-employment involves and payments on account.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with freelancer tax planning. See our sole trader accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
