Employed vs self-employed: who keeps more?
On the same gross income, the self-employed keep a little more each month — because Class 4 National Insurance (6%) undercuts employee Class 1 NI (8%). The catch: employees get employer pension money, paid holiday and sick pay that never show up in take-home comparisons.
Run your own self-employed figures →Take-home pay compared, 2026/27
| Gross salary / profit | Employed / year | Employed / month | Self-employed / year | Self-employed / month | SE advantage |
|---|---|---|---|---|---|
| £20,000 | £17,920 | £1,493 | £18,068 | £1,506 | +£149 |
| £30,000 | £25,120 | £2,093 | £25,468 | £2,122 | +£349 |
| £40,000 | £32,320 | £2,693 | £32,868 | £2,739 | +£549 |
| £50,000 | £39,520 | £3,293 | £40,268 | £3,356 | +£749 |
| £75,000 | £54,057 | £4,505 | £54,811 | £4,568 | +£754 |
| £100,000 | £68,557 | £5,713 | £69,311 | £5,776 | +£754 |
Same Income Tax in both columns (Personal Allowance £12,570, 20% to £50,270, 40% above); the difference is National Insurance class. Assumes England, Wales or Northern Ireland, no pension or student loan, and — for the self-employed column — that the whole amount is profit after expenses.
Example: £40,000 employed vs £40,000 of profit
| Employed | Self-employed | |
|---|---|---|
| Income Tax | £5,486 | £5,486 |
| National Insurance (Class 1 vs Class 4) | £2,194 | £1,646 |
| Take-home per year | £32,320 | £32,868 |
| Take-home per month | £2,693 | £2,739 |
The sole trader keeps about £549 more per year — roughly £46 a month. Against that, an employer would also be paying 15% employer NI and at least the auto-enrolment pension minimum on top of an employee's salary, plus funding holiday and sick pay — costs a freelancer must cover from their own rate.
Beyond the numbers
- Income smoothing: employees are paid the same every month; sole traders must budget for the January and July Self Assessment bills — see payments on account.
- Expenses: the self-employed deduct allowable business costs (or the £1,000 trading allowance) before tax; employees can deduct almost nothing.
- Security vs flexibility: employment brings statutory sick pay, paid holiday, maternity rights and redundancy pay; self-employment brings control over rates, hours and clients.
- Pensions: employees get employer contributions on top of salary; the self-employed must fund the whole pension themselves, though contributions still attract tax relief — see the pension calculator.
Frequently asked questions
Do you pay less tax self-employed or employed?
On the same headline income, a sole trader keeps slightly more. Income Tax is identical; the difference is National Insurance — employees pay Class 1 at 8% between £12,570 and £50,270, while the self-employed pay Class 4 at 6% over the same range. Above £50,270 both pay 2%.
Why is self-employed take-home higher on the same income?
Mainly the NI rate gap: 6% Class 4 versus 8% Class 1. But the headline hides what employees get on top — employer NI contributions (15%) that never appear on a payslip, employer pension contributions, paid holiday, and statutory sick and maternity pay.
What benefits do employees get that the self-employed do not?
Employer pension contributions under auto-enrolment, at least 28 days of paid holiday for full-time staff, Statutory Sick Pay, Statutory Maternity and Paternity Pay, redundancy rights and protection from unfair dismissal. These are worth thousands a year and should be priced into any employed-to-freelance comparison.
What extra admin comes with being self-employed?
You must register for Self Assessment, keep records of income and expenses, file a return and pay tax by 31 January each year, and make payments on account once your bill passes £1,000. From April 2026, Making Tax Digital for Income Tax adds quarterly digital updates for income above £50,000.