Invoice tax calculator

You invoiced a client. How much is actually yours, and how much should you set aside for HMRC?

How much of this invoice is mine?

Enter the invoice amount (excluding VAT) and your tax band. Subtract any costs tied to the job first.

Invoice amount excluding VAT

Costs tied to this job materials, subcontractors

Your tax band

Yours to keep

£1,480

On a £2,000 invoice at basic rate, set aside £520 for HMRC.

Taxable profit from this job

£2,000

Set aside for HMRC

£520

Yours to keep

£1,480

Invoice (excluding VAT)	£2,000
Less job costs	−£0
Taxable profit	£2,000
Set aside for tax	−£520
Yours to keep	£1,480

This applies your marginal rate to one invoice, which is the quick way to know what to bank and what to hold back. For your full year across every invoice, use the self-employed tax calculator.

Uses HMRC 2026/27 rates (Income Tax plus Class 4 NI). A guide for setting money aside, not a formal tax computation. Source: gov.uk self-employed NI rates.

Why a chunk of every invoice isn't yours

When a client pays you, it feels like the whole amount is income. Part of it belongs to HMRC. As a sole trader you pay Income Tax and Class 4 National Insurance on your profit, and that bill lands months later at Self Assessment. The freelancers who get caught out are the ones who spent the full invoice and had nothing set aside in January.

The fix is simple: move a percentage of every payment into a separate savings pot the moment it arrives. This calculator shows you that percentage based on your tax band, so the January bill is money you've already ring-fenced rather than a shock.

How much to set aside

It depends on which tax band the income falls into. For 2026/27 the marginal rates for a sole trader are:

Your situation	Marginal rate	Set aside per £1,000
Basic rate (profit £12,570 to £50,270)	26% (20% + 6% Class 4)	£260
Higher rate (profit £50,270 to £125,140)	42% (40% + 2% Class 4)	£420
Additional rate (profit over £125,140)	47% (45% + 2% Class 4)	£470

A round 30% is a safe default if you're not sure, since it leaves a small buffer for a basic-rate freelancer and softens the blow if some income tips into the higher band. If you regularly land in the higher band, set aside 40% and adjust once you know your numbers.

Worked example: a £2,000 invoice

You invoice a client £2,000 for a job with no material costs. At basic rate your marginal rate is 26%, so £520 is HMRC's and £1,480 is yours. Bank the £1,480, move the £520 to your tax pot, and January looks after itself. If that same £2,000 tipped you into the higher band, you'd hold back £840 instead.

Subtract the costs first

You only pay tax on profit, not turnover. If the £2,000 job cost you £300 in materials or a subcontractor, you're taxed on £1,700, not £2,000. Enter the job costs in the second box and the calculator works the tax on what's left. Keep the receipts, since those costs are also allowable expenses on your return.

A note on VAT

If you're VAT registered, the VAT you add to an invoice was never your money. You collect it for HMRC and hand it over on your VAT return, separately from Income Tax. Enter the amount before VAT here so you're only working out the tax on your actual income. If your turnover is under the £90,000 VAT threshold, you don't charge VAT at all, and the whole invoice is income before Income Tax and NI.

Sources

HMRC self-employed National Insurance rates gov.uk
HMRC Income Tax rates and bands gov.uk
HMRC Self Assessment tax returns gov.uk

Common questions

As a rough rule, a basic-rate sole trader should set aside about 26% of each invoice (20% Income Tax plus 6% Class 4 NI). A higher-rate freelancer should set aside around 42%. On a £2,000 invoice that's £520 aside and £1,480 kept at basic rate. Doing this per invoice avoids a nasty January bill.

Yes. Extra income is taxed at the rate for the band it falls into, your marginal rate, not your average rate. If your profit is already in the basic-rate band, another £1,000 of invoicing is taxed at 26%. If it tips you into the higher band, part is taxed at 42%.

Yes, if the invoice has costs attached. You only pay tax on profit, not turnover. If a £2,000 job cost you £300 in materials, you're taxed on £1,700. Deduct any costs tied to the work before applying your tax rate.

No. If you're VAT registered, the VAT on an invoice was never yours, you collect it and pass it to HMRC separately. Enter the amount excluding VAT here. Below the £90,000 threshold you don't charge VAT at all, so the whole invoice is income before Income Tax and NI.