Single Tax for Sole Proprietors in 2026: Groups, Limits, Taxes, and How to Choose the Right One

The author of the article: Denis Korablyov

Modified date: 31 December 2025

Registering as an individual entrepreneur (FOP) is not just about filling out a form in Diia. The most important decision at the start of a business is choosing the single tax group. A mistake here is costly: you either overpay taxes every month or lose the right to work with the clients you need and risk being removed from the simplified taxation system.

In 2026, updated income limits apply for individual entrepreneurs, the amounts of the single tax, SSC, and military levy have changed, and stricter rules are enforced when turnover limits are exceeded.

In this article, we will break down: the three single tax groups for individual entrepreneurs in 2026, the key differences between them (income limits, clients, hired employees), the new tax amounts, how to choose the optimal group for your business, and the critical mistakes that lead to entrepreneurs being removed from the simplified taxation system.

What is the simplified taxation system 

Before choosing a single tax group, it is important to understand the basics: what the simplified taxation system is and who it is suitable for. It is precisely a lack of understanding of this difference that most often leads to mistakes already at the stage of FOP registration.

The simplified taxation system (single tax) was created specifically for small and medium-sized businesses. Its main idea is simplicity and predictability. The key advantages of the simplified system are:

• lower tax rates compared to the general taxation system;
• significantly simpler accounting without complex bookkeeping;
• less reporting (for Groups 1–2 – once a year);
• fixed monthly payments for Groups 1–2, regardless of actual income.

At the same time, the simplified system also has limitations: income caps, requirements for types of activities, and the circle of clients. That is why it is important to choose the single tax group correctly.

The simplified system can be used by:

• individual entrepreneurs (FOPs) – Groups 1, 2, or 3;
• legal entities – only Group 3 of the single tax.

In this article, we focus specifically on FOPs, as for them the choice of a single tax group is critical at the start of a business.

Which single tax groups exist in 2026

In 2026, three single tax groups apply for FOPs. They differ in:

• annual income limits;
• the circle of clients (individuals, businesses, foreigners);
• the ability to hire employees;
• tax amounts and reporting requirements.

The choice of a group directly determines how much tax you will pay and with whom you will be able to work legally.

By the way! If you exceed the maximum income limit for your group, the tax authority will automatically transfer you to the general taxation system starting from the first day of the month in which the excess occurred. To avoid this, monitor your income and voluntarily move to a higher group in advance.

Before moving on to a detailed review of each group, there is one more critically important point that is often ignored – and because of which the tax authority refuses to register an individual entrepreneur under the single tax system. More on this in the next section.

Before submitting an application to register as an individual entrepreneur and choosing a single tax group, be sure to check whether you have any tax debts. Even a minimal debt can become grounds for refusal to register under the simplified taxation system.

The most common reasons for such “unexpected” debts:

• land tax (land share, summer house, inheritance);
• real estate tax;
• old fines or penalties;
• assessment errors that the person was not aware of.

A real case from practice

A client contacted us with a simple request: “I want to register as an individual entrepreneur in Group 2, everything is ready, please submit the documents.” We submitted the application and a few days later received a refusal from the tax authority. The reason: the presence of tax debt. We started investigating and found an outstanding debt of UAH 347 for land tax. Several years earlier, the client had inherited a summer house plot, did not know about the tax, did not receive any notifications, and therefore did not make the payment. 

The tax authority accrued the debt automatically, and now it was precisely this debt that blocked the registration of the individual entrepreneur under the single tax system. Until the debt was fully repaid, the tax authority refused registration, regardless of the single tax group.

The tax authority does not analyze why the debt arose or whether it is related to business activity. For the system, the mere fact of indebtedness is important, even if it is only a few hundred hryvnias.

Before submitting an application for the single tax, we recommend checking your status in the Taxpayer’s Electronic Cabinet and making sure there are no tax debts at all, even minimal ones. If any debt is found, it should first be repaid, and only then should documents for registering as an individual entrepreneur be submitted.

Group 1 single tax 2026: who it is suitable for, taxes, limits

The first single tax group is the simplest and cheapest regime for individual entrepreneurs, but at the same time the most limited. It is suitable only for very small businesses without employees and with a clearly defined circle of clients.

Group 1 can be chosen only by individual entrepreneurs who:

• do not use hired labor;
• work only with individuals (the population);
• provide household services or engage in retail trade at markets;
• have a small annual turnover.

Typical examples of activities:

• a hairdresser or manicure specialist working independently;
• a shoe, clothing, or small appliance repair specialist;
• a seller of vegetables, clothing, or household goods at a market;
• a provider of small household services without employees.

Important: any cooperation with individual entrepreneurs, legal entities, or foreign clients is prohibited, even if it is a one-time payment.

Taxes and income limit for Group 1 individual entrepreneurs in 2026

An individual entrepreneur in Group 1 pays fixed taxes, regardless of whether there was any income during the month.

Monthly payments:

Total minimum: ≈ 3 099,84 UAH per month

Even if you earned nothing in a particular month, these amounts still must be paid.

Exceeding this limit even by 1 hryvnia has consequences: a 15% single tax on the excess amount, as well as a mandatory transition to another group or the general taxation system starting from the next period.

Reporting and accounting in Group 1

• Tax declaration – once a year (by March 1 of the following year)
• Income record book – kept in free form
• RRO/PRRO – not applied (provided the activity is permitted for Group 1)
  

Group 2 single tax 2026: who it is suitable for, taxes, restrictions

The second single tax group is the most popular among individual entrepreneurs in Ukraine. It is chosen by the majority of small businesses because it combines fixed taxes with relatively broad opportunities for operation. However, there are several critical restrictions that are often overlooked.

Group 2 can be chosen only by individual entrepreneurs who:

• work independently or have up to 10 hired employees;
• engage in trade, restaurant business, or service provision;
• comply with client restrictions (see below);
• do not exceed the established income limit.

Typical business examples include online stores, coffee shops, cafés, small restaurants, beauty salons, workshops, courses, trainings, services for the population, retail and wholesale trade in goods.

An individual entrepreneur in Group 2 may work:

• with individuals (the population);
• with individual entrepreneurs and legal entities on the single tax;
• sell goods to anyone without restrictions.
  

Important: it is prohibited to provide services to legal entities on the general taxation system, budgetary institutions, and non-residents (foreign clients). This restriction applies specifically to services. If you sell goods, the client may be anyone. If you provide a service, the client must be either an individual or a single tax payer.

Taxes and income limit for Group 2 individual entrepreneurs in 2026

Taxes are fixed, regardless of income.

Monthly payments:

Total minimum: ≈ 4 496,44 UAH per month

An individual entrepreneur in Group 2 may officially hire up to 10 employees. For each employee, the following taxes are additionally paid:

These expenses do not affect the amount of the single tax, but significantly impact the overall tax burden of the business.

If the limit is exceeded, a 15% single tax is paid on the excess amount, and it is also necessary to switch to Group 3 or the general taxation system.

Reporting and RRO

• Single tax declaration – once a year (by March 1)
• RRO / PRRO – mandatory in most cases
• Income accounting – mandatory

Group 3 single tax 2026: who it is suitable for, taxes, VAT

The third single tax group is the most flexible and popular option for individual entrepreneurs in 2026. It is chosen by entrepreneurs who work with businesses, foreign clients, or plan to scale without strict limitations.

Group 3 can be chosen by:

• Individual entrepreneurs and legal entities (in this article we focus on individual entrepreneurs);
• entrepreneurs with any type of activity that is not prohibited by the Tax Code;
• businesses with large turnover;
• those who work with companies on the general taxation system;
• those who cooperate with non-residents.

Typical fields include IT, freelancing, consulting, marketing, design, SMM, online services, manufacturing and wholesale, agency and intermediary services.

An individual entrepreneur in Group 3 can work with any clients. This is what makes Group 3 optimal for businesses that are growing or working with large customers.

Taxes and income limit for Group 3 individual entrepreneurs in 2026

In Group 3, taxes depend on income:

If there is no income, only SSC is paid.

A Group 3 individual entrepreneur may voluntarily become a VAT payer by choosing the 3% rate.

VAT is beneficial if your clients are VAT payers, you have significant VAT expenses, or you work with large businesses or the public sector. If your clients are individuals or single tax payers without VAT, VAT is usually not needed.

If the limit is exceeded, a 15% single tax is paid on the excess amount, a mandatory transition to the general taxation system applies, and VAT registration is required.

Reporting and RRO

• Single tax declaration – quarterly (within 40 days after the quarter)
• Tax payment – within 10 days after filing the declaration
• RRO / PRRO – mandatory (for most types of activities)
  

Which taxes for individual entrepreneurs change during the year?

When planning taxes, it is important to understand: not all indicators change together with the minimum wage. Some are fixed once and for all on January 1, while others may change during the year. This directly affects an individual entrepreneur’s budget.

Fixed as of January 1 and DOES NOT change during the year:

• Maximum income limit

Group 1 – 1 444 049 UAH
Group 2 – 7 211 598 UAH
Group 3 – 10 091 049 UAH

• Single tax and military levy for Groups 1–2

Group 1:  Single tax – 332,80 UAH/month, Military levy – 864,70 UAH/month
Group 2: Single tax – 1 729,40 UAH/month, Military levy – 864,70 UAH/month

What does change during the year is: SSC (single social contribution)

The SSC for individual entrepreneurs is calculated as 22% of the minimum wage for a specific month. That is why it may change during the year together with the minimum wage. This is a key point that is often underestimated in financial planning.

Practical advice: when planning your annual budget, allow for an additional 10–15% buffer specifically for possible SSC increases. This will help avoid cash gaps and unpleasant surprises in the middle of the year.

Conclusions

Choosing a single tax group is not a formality, but a financial decision that directly affects your budget, clients, and the ability to scale your business. Here are the key things to remember.

1. Before registering as an individual entrepreneur, be sure to check for tax debts. Even a minor debt (300–500 UAH, for example, for land tax) can block registration as a single tax payer. This is one of the most common reasons for refusal that entrepreneurs only learn about after the fact.
2. Group 1 single tax – minimal taxes, but maximum restrictions. Suitable only for household services to the population or trade at markets. This is an option for very small businesses with no growth plans.
3. Group 2 single tax – the optimal choice for most small businesses. Fixed taxes, up to 10 employees, income up to 7.2 million UAH/year. Goods can be sold to anyone, but services only to individuals and single tax payers.
4. Group 3 single tax – maximum freedom and scalability. No restrictions on clients or employees, income up to 10 million UAH/year, and the ability to work with foreigners and large companies.
5. The single tax group can be changed. Transition is possible quarterly by submitting an application 15 days before the start of the new quarter.