Self-Employed Tax in Scotland: Complete Guide
Everything you need to know about taxes and National Insurance for self-employed people in Scotland.
Getting Started as Self-Employed
When to Register
You must register with HMRC as self-employed if your trading income is more than £1,000 in a tax year. You should register within 3 months of starting your business.
How to Register
- Online at www.gov.uk/new-business
- By phone: 0300 200 3504
- By post using SA401 form
Tax Year Timing
The UK tax year runs from 6 April to 5 April. All self-employed income is assessed on this basis.
Trading Income and Allowances
Tax-Free Allowance (£1,000)
If your trading income is £1,000 or less, you don't need to register with HMRC or file a Self Assessment tax return. This is new from April 2023.
Example: Freelancer earns £800 in profit = No tax registration required.
Personal Allowance
You also get a personal allowance of £12,570 (2025/26). This applies to all income, including trading income from self-employment.
Example: Self-employed person with £30,000 trading income:
- Trading income: £30,000
- Less personal allowance: £12,570
- Taxable income: £17,430
Allowable Expenses
You can deduct business expenses from your trading income. Only expenses that are used wholly for business purposes qualify.
- ✓ Allowed: Office equipment, professional fees, business insurance, materials
- ✗ Not allowed: Personal expenses, private car costs (use mileage allowance), food consumed at home
Income Tax on Self-Employed Profits
Self-employed income is taxed using the Scottish tax brackets. Your taxable profit (after expenses and personal allowance) is taxed at the standard rates.
Scottish Tax Bands (2025/26)
Example: £30,000 Trading Income
- Trading profit: £30,000
- Less personal allowance: £12,570
- Taxable income: £17,430
- Tax @ 19%: £2,162 × 19% = £410.78
- Tax @ 20%: £10,956 × 20% = £2,191.20
- Total income tax: £2,601.98
National Insurance for Self-Employed
Self-employed people pay different National Insurance to employees. You pay two types:
Class 2 National Insurance
2025/26 Rate: £163.80 per year (flat rate)
A fixed weekly contribution that most self-employed people over 16 pay if profits are over £6,725 per year.
- Paid monthly or quarterly by direct debit
- Counts towards State Pension eligibility
- You don't pay Class 2 if you defer payment
Class 4 National Insurance
2025/26 Rates:
8% on profits £11,908 - £50,270
2% on profits above £50,270
Class 4 is calculated as a percentage of your trading profit. It's paid through Self Assessment.
Example: £30,000 Trading Income
- Trading profit: £30,000
- Less Class 4 lower threshold: £11,908
- Profit subject to 8%: £18,092
- Class 4 NI: £18,092 × 8% = £1,447.36
- + Class 2 NI: £163.80
- Total National Insurance: £1,611.16
Quarterly Payments on Account
If you owe tax of more than £1,000 in Self Assessment, HMRC usually requires you to pay tax in advance in two installments (quarterly payments on account).
January 31: First payment of 50% of your estimated tax bill
July 31: Second payment of 50% of your estimated tax bill
January 31 (next year): Balance payment or refund of any overpayment
Pro Tip
Quarterly payments can be a cash flow challenge. Many self-employed people set aside a percentage of income each month to cover these payments.
Record Keeping Requirements
HMRC requires you to keep detailed records of your income and expenses. You must keep records for at least 5 years.
Essential Records to Keep:
- Business income (invoices, receipts, bank statements)
- Business expenses (invoices, receipts, proof of payment)
- Mileage logs (if using vehicle for business)
- Professional fees and subscriptions
- Bank and credit card statements
Calculate Your Self-Employed Tax
Use our free Self-Employed Tax Calculator to estimate your tax and National Insurance:
Self-Employed Tax CalculatorImportant Dates for 2025/26
Disclaimer: This guide is for informational purposes. Tax rules are complex and change annually. We recommend consulting with a tax advisor or accountant for personalized guidance on your self-employed business.