Self-assessment income tax receipts almost double in 10 years

New data from HMRC shows that in the first 11 months of the 2025-26 tax year, self-assessment income tax receipts have hit a record high of £55.7 billion. This is 13.5% higher than last year with a month to spare and almost double the £29.3 billion garnered 10 years ago.

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From self-employed workers and company directors to investors and landlords, various groups make up the 12 million individuals who must complete a tax return every year. These new figures indicate that many are feeling the brunt of swingeing tax reforms introduced over the past decade, notably frozen thresholds and less generous tax-free allowances and exemptions.

With four million people in the UK classified as self-employed, operating as sole traders or in partnership with one or more others, this cohort makes up a notable proportion of those affected. A further 1.8 million are owner/directors of private limited companies, many of which may consider themselves self-employed despite not meeting HMRC’s definition.

The freedom of being your own boss holds obvious appeal but also comes with significant financial challenges and tax complexity. With the end of the tax year fast approaching - and as interactive investor’s research* shows, a worrying lack of clarity and understanding on UK tax rules - interactive investor’s personal finance expert, Craig Rickman, explains how the self-employed can keep HMRC at bay and improve their future financial security in the process.

Rickman explains: “Self-assessment income tax receipts are set to continue swelling over the coming years, so it’s crucial for self-employed workers to use tax-efficient tools to their advantage, helping them feel more in control and keep more of their hard-earned money. With the end of the current tax year just under two weeks away, now is the time to act as many key allowances and exemptions are lost after 5 April.”

Mounting tax pressures

Rickman adds: “This new HMRC data illustrates the effectiveness of freezing tax thresholds and slashing handy tax-free allowances as revenue grabbing strategies.

“Income tax thresholds haven’t increased since 2021-22 - in fact, the 45% threshold reduced from £150,000 to £125,140 in 2023 - meaning more sole traders and partnerships are either entering the tax net or being pulled into higher brackets as their profits naturally rise. And this trend isn’t likely to stall any time soon. At the Autumn Budget 2025, Chancellor Rachel Reeves announced the deep freeze on tax bands will be prolonged for three more years until 2030-31.

“Company owner/directors will be feeling the pinch too. Many structure their affairs by drawing a lower salary and the rest in the dividends as a tax-planning strategy. However, the value of dividends you can earn every year tax-free has been gradually reduced from £5,000 in 2018 to just £500 today. This is resulting in bigger HMRC bills for company directors who must file self-assessment if dividend income exceeds £10,000. The burden will increase further from April when the basic and higher rates of dividend tax hike by two percentage points.

“Self-employed workers and company directors may also be paying more tax on savings interest. While returns on cash savings have reduced recently in response to falling interest rates, they remain far higher than at any time between 2009 and 2022 when the Bank of England base rate hovered at record lows. With savers now getting more bang for their buck, rising numbers are tripping above the annual savings allowance and paying tax on some of their interest. What’s more, this allowance, which is £1,000 for most basic-rate taxpayers and £500 for higher-rate taxpayers, hasn’t budged since it was introduced 10 years ago. If it had risen in-line with inflation, today it would stand at around £700 and £1,400 for basic and higher-rate taxpayers, respectively.

“We should note that not everyone who breaches their savings allowance must complete a tax return. If you’re employed or receive pension income, HMRC typically adjusts your tax code and collects the sum through PAYE.”

Below, Craig Rickman outlines why using pensions and ISA before 5 April is vital for self-employed workers to reduce how much the pay through self-assessment.

1) Top up your pension for immediate income tax relief

“interactive investor research* found that few self-employed workers understand the benefits of pension saving, but it can be a fantastic tactic to combat higher income tax bills, provided you’re happy to lose access to the money until age 55, rising to 57 in 2028.

“Most people can pay the lower of £60,000 or 100% of relevant earnings into a pension every year and receive upfront income tax relief at their marginal rate, giving your savings an immediate boost. So, if you pay 40% tax, a £1,000 pension contribution will effectively only cost you £600.

“With personal pension contributions, you receive 20% income tax relief upfront and must claim any additional tax back via self-assessment.

“Company owner/directors can make personal contributions to their pension or pay via the business. The latter will lower their company’s corporation tax bill instead of receiving income tax relief but could be the more effective strategy. It’s worth speaking with a regulated financial adviser to work out which option is best for you and your business.

“When it comes to choosing a pension, self-invested personal pensions (SIPP) can be a great option for self-employed workers and small business owners. Among other things, they offer flexibility in terms of contribution options. This can be a natural fit for sole traders and partnerships who typically have irregular incomes so may struggle to commit a significant amount every month, preferring to add lump sums when cashflow permits and/or profits become clearer.

“What’s more, as pension contributions can reduce your ‘net-adjusted’ income, topping up your savings by 5 April may also help to swerve the 62% tax trap, enable you to keep free childcare, and avoid and high-income child benefit charge.”

2) Use your ISA allowance to keep more of your savings interest and investment growth

“We should recognise that, even after paying tax on their cash savings, people are still better off than they were before.

“However, by using an ISA, you can achieve the best of both worlds as these tax-wrapped accounts shelter any interest, dividends and capital gains from HMRC. And it’s important to act this side of tax year end because the £20,000 annual ISA limit resets on 6 April, and if you don’t use it, you lose it – you can’t carry forward any unused allowance to future tax years.

“ISAs can act as a handy sidekick to pensions for self-employed workers as the money can be accessed whenever you like, providing a flexible source of savings to support your business should you enter a dry patch.

“Making the most of ISAs has particular importance right now, as from 6 April 2027, the amount you can pay annually into the cash version will fall to £12,000 if you’re under age 65. In addition, from the same month, the tax rates on savings interest will increase two percentage points across the board, hitting anyone with holdings outside ISAs and other tax-efficient vehicles who exceed their savings allowance.

“These upcoming changes offer a timely prompt for people to consider which ISA to choose. If you don’t need the money for five years or more, directing surplus savings into a stocks & shares ISA might be the savvier move. While returns aren’t guaranteed and the value can move up and down, history tells us investing offers better odds than cash savings of growing your wealth over the long term.”

*interactive investor’s “Second-class retirement: the self-employed experience” report