Freelance designer on £25,000

Sole Trader. Age 28. Pension preference: none.

Every figure on this page is computed at build time by the same engines that power the live salary–dividend split, take-home and SIPP optimiser calculators. Inputs come from a single CSV row; outputs come from the engines. No static lookup tables, no hand-coded numbers.

Net cash

£20,664

Pension

£0

Effective rate

12.3%

Marginal rate

26%

Freelance designer vs Ltd Co director at £25,000 — what changes

The decision a freelance designer faces at £25,000 of income for 2026/27 is rarely "which calculator do I use" — it is "which legal structure leaves the most money in my pocket after tax." This page resolves the question for one specific scenario by running the relevant engines side-by-side at build time, so every number that follows is reproducible from a single CSV row and the BracketMath source code.

On the sole-trader route, taxable profits are £23,750 after the trading allowance / actual expenses decision, producing £20,664 of net cash after income tax + Class 4 + voluntary Class 2.

Incorporating instead — Ltd Co at the same turnover and expense pot — would produce £20,038 of net cash. The gap of £626 is in favour of the sole-trader route — at this turnover level the corporation-tax + dividend stack offers no edge over self-assessment. Against that gap, weigh the ~£800–£1,500/yr accountancy overhead, the public Companies House filing burden, and the loss of the trading allowance.

For a complete walk-through of the optimisation for this specific scenario, see the comparison table further down this page.

The numbers, line by line

Turnover	£25,000
Taxable profits	£23,750
Trading allowance vs actual expenses	Actual expenses
Income tax	£2,236
Class 4 NI	£671
Class 2 NI (voluntary)	£179
Net cash (year)	£20,664
Net cash (monthly)	£1,722
Hours-equivalent at NLW (£12.21/hr)	1,692 hrs
Effective rate	12.3%
Same turnover as Ltd Co (no pension)	£20,038
Incorporate vs stay sole trader	£626 for staying sole trader

Why this scenario is different

Compared to the closest peer profile — Freelance photographer at £25,000 — this scenario sits £0 higher on gross income. That moves net cash by +£0, the pension contribution by +£0, and the effective rate by +0%. The effective rate moves only modestly — both scenarios sit inside the same binding tax band. Taxable profits change from £23,750 to £23,750 (after the trading-allowance / actual-expenses choice).

Questions this scenario raises

Why is the effective rate lower than the headline tax brackets?

Because the headline 20% / 40% / 45% rates apply only to the income slice in each band — not the whole income. The Personal Allowance shelters the first £12,570 at 0%; the basic-rate band only charges 20% on the next £37,700; and so on. The effective rate on the entire income is the weighted average of every slice — typically much lower than the headline number people quote.

Is the figure on this page net of accountancy fees?

Yes when relevant — the take-home calculator deducts an umbrella fee for inside-IR35 rows (£1,500/yr assumed) and the optimiser allows for an arbitrary annual business expense pot (£3,500/yr default for Ltd Co rows). Sole-trader rows assume the higher of £800/yr or 5% of turnover as actual business expenses, which approximates a low-overhead service business.

What if I have rental income alongside this self-employment?

Add it to the `otherIncome` field of the calculator. Property income is taxed at non-savings, non-dividend rates (so stacks alongside salary in the band schedule). The first £1,000 of rental income can also be sheltered by the separate Property Allowance under FA 2017 s.16.

Do I need to file a Self Assessment for this income?

Yes, if the gross self-employment income is over £1,000 (the threshold above which the trading allowance no longer provides "full relief"). Even below that, you may wish to file voluntarily to claim losses or to maintain a tax-payer record. The deadline is 31 January following the end of the tax year (so 31 January 2028 for 2026/27).

What is the £1,000 trading allowance and when does it help?

The trading allowance (ITTOIA 2005 s.783A) lets a sole trader deduct a flat £1,000 from gross trading income in lieu of claiming actual expenses. It strictly beats actual expenses whenever expenses are less than £1,000. The engine picks whichever produces lower taxable profits — for this row the chosen route is shown in the comparison table.

Methodology

Income tax, National Insurance and Corporation Tax bands taken from HMRC's 2026/27 rates and allowances tables (gov.uk/.../income-tax; corporation-tax). Pension Annual Allowance and taper rules from Finance Act 2004 / 2023. Trading allowance per ITTOIA 2005 s.783A. Voluntary Class 2 figure (£179.40/yr = £3.45/wk × 52) from HMRC voluntary NI guidance.

Style: 2026/27 tax year throughout; figures rounded to whole pounds in the user-facing prose; effective rates computed as (deductions / gross). The voice is methodological — no first person, no claimed credentials, no marketing fluff.

This page is not personalised advice; for advice regulated by the FCA, consult an adviser registered with the Financial Conduct Authority. See the full disclaimer.