If you’re earning £30,000 in 2026/27, you’ll pay roughly:
- As an employee (PAYE): £4,880 total — £25,120 take-home
- As a sole trader: £4,532 total — £25,468 take-home
- As a limited company director: £5,597 total — £24,403 take-home (worse than sole trader after the April 2026 dividend rate change)
- As a landlord with £30k profit: roughly the same as sole trader — but Section 24 often pushes the bill higher if you have a mortgage
"How much tax do I pay?" is the most-Googled question in UK personal finance. The honest answer is "it depends" — and not in a hand-wavy way. The same £30,000 can produce four different tax bills depending on how you’ve structured your income.
This guide walks through the four most common scenarios for 2026/27 — the tax year that started on 6 April 2026 and includes the new dividend tax rates (10.75% / 35.75% / 39.35%). Plus how to pay the right amount and the calculators that do the maths for you.
The four scenarios at a glance
| Income type | £30k | £50k | £100k |
|---|---|---|---|
| Employee (PAYE) | £4,880 | £10,486 | £31,232 |
| Sole trader | £4,532 | £9,732 | £30,689 |
| Ltd co director (salary + dividends) | £5,597 | £10,512 | £34,790 |
| Landlord (rental profit) | £4,532* | £9,732* | £30,689* |
*Landlord figures assume net rental profit. If you have a mortgage, Section 24 means you don’t deduct interest — you get a 20% tax credit on it instead.
Notice the surprising bit: the sole trader pays less than the employee at every level. That’s because self-employed people don’t pay employee NIC (they pay lower Class 4 NIC at 6%/2% instead of 8%/2%). And the limited company director pays more than both at most levels — that’s the April 2026 dividend rate increase doing its work.
Scenario 1: You’re an employee on PAYE
Employee, paid through PAYE
If you’re paid through PAYE (Pay As You Earn), your employer calculates and deducts income tax based on your tax code, employee NIC at 8% on earnings between £12,570 and £50,270 (then 2% above), student loan repayments if applicable, and any workplace pension contributions.
For 2026/27, the income tax bands (England, Wales, Northern Ireland — Scotland is different) are:
| Band | Income range | Rate |
|---|---|---|
| Personal allowance | £0 – £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | £125,140+ | 45% |
Worked example for £40,000 salary: Personal allowance £12,570 tax-free; basic rate band: £40,000 − £12,570 = £27,430 × 20% = £5,486 income tax; Employee NIC: £27,430 × 8% = £2,194 NIC. Total deductions £7,680. Take-home £32,320/year, £2,693/month.
Use the Take-Home Pay Calculator →Scenario 2: You’re a sole trader (self-employed)
Sole trader / self-employed / freelancer
As a sole trader you pay income tax at the same rates as employees (20% / 40% / 45%) on your profit (not turnover), plus Class 4 NIC at 6% on profit between £12,570 and £50,270 then 2% above. Class 2 NIC was abolished from 6 April 2024 — there’s a voluntary £17.75/week rate if you have low profits and want to build State Pension credit, but it’s not automatic.
You file a self-assessment return (SA100) by 31 January after the tax year ends. Tax is due in two payments on account (50% in January, 50% in July) — see our Payment on Account guide.
Worked example for £40,000 sole trader profit: Personal allowance £12,570; income tax £27,430 × 20% = £5,486; Class 4 NIC £27,430 × 6% = £1,646. Total tax £7,132. Take-home £32,868 — about £550 better off than the equivalent employee.
Use the Sole Trader Calculator →What counts as "profit"? Your total turnover minus your allowable business expenses. See our Business Expenses Guide for the full list of what’s deductible.
Want to know your actual bill?
Calculators are great for ballparks. But pension contributions, Marriage Allowance, the £100k personal allowance taper, payments on account and your specific deductible expenses all change the picture. Book a free 20-minute call.
Book a free 20-min callScenario 3: You’re a limited company director
Director paying yourself salary + dividends
If you run a limited company, the standard extraction pattern is: pay yourself a small salary (usually £12,570 to use your personal allowance — tax-deductible for the company); the company pays Corporation Tax on what’s left (19% up to £50k profit, marginal relief between, 25% above £250k); take the rest as dividends — taxed personally at 10.75% / 35.75% / 39.35% (new 2026/27 rates) after the £500 dividend allowance.
The April 2026 dividend rate hike matters. A director taking £40,000 of dividends pays about £800 more tax in 2026/27 than they did in 2025/26.
Worked example for £60,000 of company profit: Director salary £12,570 (uses PA, no income tax or NIC); employer NIC on salary: 15% on £7,570 above £5,000 = £1,136; taxable company profit £46,294; corporation tax at 19% £8,796; dividends available £37,499; personal tax on dividends £3,977. Total tax £13,909. Take-home £46,091.
At £60,000 profit, a sole trader pays £13,889 — essentially identical to the limited company route after the April 2026 dividend rate change. Before April 2026, the limited company saved about £900/year at this profit level.
Dividend Calculator → Corporation Tax Calculator →Why incorporate then? At higher profit levels (£150k+), where you don’t need to extract everything (e.g. you can leave profits in the company, smooth income across tax years, or pay into a pension), the limited company still wins. It also offers liability protection. But "automatic tax saving" — the old reason — is largely gone for owner-managed businesses extracting all profits. See our Sole Trader vs Limited Company guide.
Scenario 4: You’re a landlord
Landlord with rental income
If you own residential rental property as an individual (not through a company), rental profit is taxed at the same rates as employment or self-employment income — 20% / 40% / 45%. You file it on your SA100 self-assessment return.
The Section 24 catch (mortgage interest): Since April 2020, individual landlords cannot deduct mortgage interest as an expense. Instead, you get a 20% tax credit on mortgage interest.
What this means: If you’re a higher-rate (40%) taxpayer with a £1,000/month mortgage interest bill, you used to deduct £12,000 and save £4,800 in tax. Now you only get a £2,400 tax credit — you pay £2,400 more tax per year on the same property.
MTD ITSA is coming for landlords. From April 2026, landlords with rental income over £50,000 must comply with Making Tax Digital for Income Tax — quarterly digital submissions. The threshold drops to £30,000 in April 2027 and £20,000 in April 2028. See our MTD ITSA Landlord Guide.
Tax Calculator (works for landlords) → Buy-to-Let Tax Guide →What about multiple income sources?
If you have more than one income type, they all stack. HMRC’s order: earned income first (uses personal allowance), then savings interest (with Personal Savings Allowance), then dividends last (with £500 dividend allowance).
A common mistake: a director with £40,000 salary takes £15,000 of dividends, thinking they’re "basic rate" because each is under the threshold. But salary £40,000 + dividends £15,000 = £55,000 total income — so £4,730 of the dividends fall in the higher-rate band at 35.75%, not 10.75%.
The £100k trap
If your income is between £100,000 and £125,140, your effective marginal rate is 60%. Every £1 you earn over £100,000 means 40p income tax PLUS the loss of 50p of personal allowance (which would have been tax-free at 40% = 20p more tax). Total: 60p tax on every additional pound.
The fix: salary sacrifice into pension. Contribute £25,140 to pension via salary sacrifice and your taxable income drops back below £100,000, restoring your personal allowance.
Coming changes you should know about
April 2027: All income tax rates rise by 2 percentage points. Basic 20→22%, higher 40→42%, additional 45→47%. The bands stay the same. Announced in the Autumn 2025 Budget.
April 2026 (already in effect): Dividend rates rose 2 points on basic and higher. Employer NIC is now 15% above £5,000.
How to actually pay the right amount
Three things that catch people out: payments on account (if your tax bill is over £1,000, HMRC asks for two advance payments toward next year); the 31 January deadline is for filing AND paying (late filing £100 immediately, late payment 7.75% interest + 5% surcharge after 30 days); keep records (HMRC can investigate up to 6 years back).
Sources & further reading
This article was last reviewed in May 2026 and reflects the 2026/27 tax year. It’s general information, not personal tax advice. For your specific situation, please get in touch.