£38,000 as an employee or self-employed: take-home compared (2026-27)
On £38,000 an employee takes home £30,880 and a sole trader with the same profit keeps £31,388 in 2026-27. The £508 gap comes only from National Insurance: Income Tax is £5,086 either way.
| Income Tax (both) | £5,086 |
| Employee Class 1 NI | £2,034 |
| PAYE take-home | £30,880 |
| Self-employed Class 2 + Class 4 NI | £1,526 |
| Self-employed take-home | £31,388 |
| Difference | £508 more self-employed |
How this is worked out
Both columns use the same Income Tax bands in England. The difference is National Insurance: employees pay 8% Class 1 between £12,570 and £50,270 and 2% above, while the self-employed pay Class 4 instead.
Class 2 National Insurance is treated as paid when profits are £7,105 or more, so there is nothing to pay. Class 4 is 6% on profits between £12,570 and £50,270 and 2% above.
The comparison treats £38,000 as salary on one side and as taxable profit on the other. It leaves out what an employer adds on top (employer NI, pension, paid holiday) and what a sole trader pays out as expenses. Assumptions: England, tax code 1257L, no other income.
Sources: Income Tax rates and allowances (GOV.UK), National Insurance rates and categories (GOV.UK), Self-employed National Insurance rates (GOV.UK)