How is your Self Assessment tax bill calculated?

Whenever you get handed a bill, you want to know where the final figure came from. And what's true after a meal in a restaurant is certainly true when it comes to your annual Self Assessment tax bill. It can be tough to get your head around the process, but we’re here to explain how your bill is calculated, when and where you can view it, and how FreeAgent can help you soar through Self Assessment.       

What is a Self Assessment tax bill?

HMRC uses the Self Assessment system to collect Income Tax and, where applicable, National Insurance. If you earn income that has not already been reported to HMRC, you need inform them through a Self Assessment tax return each year. This includes profit from your business. You also need to include any taxable income HMRC does know about, such as income from employment, so they have a full picture. HMRC uses the information you report to generate your Self Assessment tax bill.

Who has to file a Self Assessment tax return?

Some individuals are legally required to file a Self Assessment tax return to HMRC by 31st January each year, while others may choose to do so voluntarily (find out why you might file voluntarily in our guide). If you’re not sure whether you need to submit a tax return, you can use the Self Assessment checker on HMRC’s website or read our guide to who needs to file Self Assessment.

How is your Self Assessment tax bill calculated?  

Your Self Assessment bill is made up of Income Tax and, where applicable, National Insurance.

Income Tax

Your income tax bill is calculated by adding together all your taxable sources of income and then deducting any allowable expenses, available capital allowances and/or other allowances, and your personal allowance for the year. That’s what you do when you file your Self Assessment return. HMRC then applies the relevant rate of tax to each income source.

National Insurance

Depending on where your income comes from, you may also have to pay National Insurance. If you’ve been self-employed during the 2023/24 tax year, you’re likely to be required to pay two types of National Insurance: Class 2 and Class 4. Class 2 NI is a flat weekly rate, while Class 4 is calculated as a percentage of your profits.

Note: from the 2024/25 tax year, you’ll no longer be required to pay Class 2 National Insurance, though you may decide to make voluntary contributions to ensure you receive the full State Pension.

You can find out more about self-employed National Insurance rates on the government’s website.

Deductions

Any tax you have already paid ‘at source’ (such as tax deducted from your salary by an employer) will be deducted from the amount of Income Tax and National Insurance you owe to calculate your final amount still outstanding.

Further reading: If you need information about preparing for Self Assessment or how to complete your tax return, you can find all the key information, along with more detailed guides, on our Self Assessment hub. There’s also more information available in the government’s guide to understanding your Self Assessment tax bill.

Payments on account

If your total bill for Income Tax and Class 4 National Insurance comes to more than £1,000 a year, and you have not already paid at least 80% of your tax at source, you will need to make a payment on account. This is one additional payment towards next year’s bill on 31st January, followed by another payment on 31st July.

When can you view your bill?

If you file your tax return online on HMRC’s website, your Self Assessment tax bill will be displayed in the ‘View your calculation’ area as soon as you’ve provided all the required information. If you file a paper tax return, you’ll receive your tax bill in the post after you’ve sent your completed tax return to HMRC. You can use HMRC’s tool to check how soon you can expect your bill after your filing date.

When you know how much you owe, all that remains is to pay your Self Assessment tax bill by midnight on the 31st January that follows the end of the tax year that you’re paying for. So, for example, your bill for 2023/24 should be paid before 31st January 2025.

Filing your Self Assessment tax return with FreeAgent

If you’re a sole trader, a limited company director or an unincorporated landlord and you’re looking for a way to make the Self Assessment process simpler, our award-winning online accounting software could be the answer.

With support for the Main Return, the Employment page, the Self-employment page and the UK property page, FreeAgent takes the data you enter throughout the year to complete parts of your tax return automatically. When you’ve provided all the required information, your final tax bill will be available for you to view in the following areas of your FreeAgent account:

• your Tax Timeline
• the Self Assessment summary page
• the top of each page of your tax return

When it’s time to file your tax return, all you’ll need to do is double-check the information you’ve provided. You may also want to ask an accountant to check the information. Then it’s simply a case of clicking the ‘Prepare to file online’ button to submit it directly to HMRC. 

You can find more information for sole traders, limited company directors and unincorporated landlords about using FreeAgent to complete and file your Self Assessment tax return in our Knowledge Base.

If you’d like to learn more, why not try a 30-day free trial to see for yourself how FreeAgent can help with Self Assessment. There’s a reason 9 out of 10 businesses feel more confident about their finances using FreeAgent (Small Business Monitor survey, Spring 2024).

Originally published 12 January 2023
Last updated 15 November 2024