Same income, different tax
The same income can leave you with different amounts depending on how you earn it. Income Tax is charged at the same rates on wages, self-employed profit and rental profit, shown on the income tax rates page, but National Insurance is not.
On £40,000, an employee keeps £32,321.40, a self-employed person keeps £32,868.20 and someone with £40,000 of rental profit keeps £34,514.00. The Income Tax is almost the same in each case. The difference is National Insurance: employees pay the most, the self-employed pay a lower rate, and rental profit has none.
What you keep at each income
The table compares an employee paid through payroll with a self-employed sole trader and a landlord whose only income is rental profit. It takes off Income Tax and National Insurance only, for England, Wales and Northern Ireland, with no pension or student loan.
| Income | Employee | Self-employed | Rental profit |
|---|---|---|---|
| £20,000 | £17,921.40 | £18,068.20 | £18,514.00 |
| £30,000 | £25,121.40 | £25,468.20 | £26,514.00 |
| £40,000 | £32,321.40 | £32,868.20 | £34,514.00 |
| £50,000 | £39,521.40 | £40,268.20 | £42,514.00 |
| £60,000 | £45,361.00 | £46,111.40 | £48,568.00 |
| £80,000 | £56,961.00 | £57,711.40 | £60,568.00 |
Source: Income Tax and employee and employer National Insurance; Class 4 National Insurance for the self-employed. Figures from the site's take-home and self-employed calculators.
Why the amounts differ
Employees pay Class 1 National Insurance through payroll. Self-employed people pay Class 4 National Insurance on their profit at a lower main rate, through Self Assessment. Rental profit is not earnings for National Insurance, so a landlord pays Income Tax only. The National Insurance rates page lists each rate.
Employees pay through each pay packet, using a tax code. Self-employed people and landlords pay through Self Assessment, often with two payments on account, so the money leaves later but in larger amounts. The money deadlines calendar shows the Self Assessment dates.
The cost to an employer
An employer also pays National Insurance on top of an employee's salary. This does not reduce the employee's pay, but it is part of what the job costs, and it is one reason some work is offered on a self-employed basis. Whether someone is really self-employed depends on how they work, not on the label.
| Salary | Employer pays a year |
|---|---|
| £20,000 | £2,250.00 |
| £30,000 | £3,750.00 |
| £40,000 | £5,250.00 |
| £50,000 | £6,750.00 |
| £60,000 | £8,250.00 |
| £80,000 | £11,250.00 |
Source: GOV.UK rates and thresholds for employers.
What this does not show
Employees get rights that the self-employed do not, such as paid holiday, sick pay and an employer pension contribution. Self-employed people and landlords can deduct allowable expenses before tax, and landlords face extra rules on mortgage interest. From April 2027, rental profit gets its own higher rates, as set out in what changes in April 2027. For your own figures, the take-home pay calculator covers employees.