Getting Started
If you earn more than £1,000 from self-employment in a tax year, you need to register with HMRC and file a Self Assessment tax return. You should register as soon as possible after starting — the deadline is 5 October after the end of your first tax year of trading.
How to Register
- Go to gov.uk/register-for-self-assessment
- You'll need your National Insurance number
- HMRC will send you a Unique Taxpayer Reference (UTR) by post within 10 working days
- You'll also need to activate your account online
What Tax Do You Pay?
Self-Employed Tax Summary (2025/26)
- Income Tax — Same bands as employed: 20% basic, 40% higher, 45% additional
- Class 4 NI — 6% on profits £12,570–£50,270, 2% above £50,270
- Class 2 NI — Abolished from April 2024 (voluntary only)
Your tax is calculated on your net profit — that's your total income minus allowable business expenses.
Allowable Expenses
You can deduct costs that are incurred "wholly and exclusively" for your business. Common deductible expenses include:
- Office costs — stationery, phone bills, software subscriptions, internet (business portion)
- Use of home as office — simplified expenses: £6/week (£312/year) with no receipts needed, or calculate actual proportion of bills
- Travel — business mileage at 45p/mile (first 10,000 miles), 25p/mile after. Public transport, parking, hotels for business trips
- Stock and materials — goods you buy to sell, raw materials
- Marketing — website hosting, advertising, business cards
- Professional fees — accountant, solicitor, professional memberships
- Insurance — professional indemnity, public liability
- Equipment — tools, computers, machinery (capital allowances apply for larger items)
- Training — courses and qualifications that maintain or update existing skills (not new skills)
- Bank charges — business account fees, interest on business loans
💡 Keep ALL receipts. HMRC can ask for evidence going back 6 years. Use an app like FreeAgent or QuickBooks to photograph receipts as you go.
Payment on Account
Once your tax bill exceeds £1,000, HMRC requires you to make Payments on Account. This means paying your estimated tax in advance:
- 31 January — First payment on account (50% of last year's bill) + any balance owed from last year
- 31 July — Second payment on account (50% of last year's bill)
⚠️ In your first year, this creates a "double whammy" — you pay all of last year's tax PLUS 50% of next year's estimated bill on 31 January. Budget accordingly.
Making Tax Digital (MTD)
From April 2026, self-employed individuals earning over £50,000 must use MTD-compatible software to keep digital records and submit quarterly updates to HMRC. From April 2027, this extends to those earning over £30,000.
Compatible software includes: FreeAgent, QuickBooks, Xero, GoSimpleTax, and others on HMRC's approved list.
Key Deadlines
🔴 5 October — Register for Self Assessment (new businesses)
🔴 31 October — Paper tax return deadline
🔴 31 January — Online tax return + first payment on account + balancing payment
🔴 31 July — Second payment on account
The £1,000 Trading Allowance
If your self-employment income is under £1,000, you don't need to register or pay tax on it at all. This is the Trading Allowance. If you earn between £1,000 and roughly £12,570 (your Personal Allowance), you'll need to register and file but won't owe any tax.