Self-Employed Tax Guide UK — Everything You Need to Know

Self-employment offers freedom and responsibility — including tax responsibility. Here’s how to get it right.

Getting Started

Do You Need to Register?

Annual Self-Employed Income	Registration Required?
Under £1,000	No (trading allowance)
Over £1,000	Yes
Any amount if claiming expenses	Often better to register

How to Register

Step	Action
1	Go to gov.uk/register-for-self-assessment
2	Create Government Gateway account
3	Complete registration
4	Receive UTR number (10 digits)
5	Deadline: 5 October of second tax year

What You’ll Need

Document	Why
National Insurance number	Identification
Business start date	Registration
Business address	May be home
Nature of business	Description

Understanding Tax Years

Key Dates

Date	Significance
6 April	Tax year starts
5 April	Tax year ends
5 October	Register by (second year)
31 October	Paper return deadline
31 January	Online return + payment deadline
31 July	Payment on account deadline

Example Timeline

Event	Date
Start business	June 2025
First tax year	2025/26 (April 2025-April 2026)
Register by	5 October 2026
File return by	31 January 2027
Pay tax by	31 January 2027

Income Tax

Tax Rates 2024/25

Band	Rate	Income
Personal Allowance	0%	£0-£12,570
Basic Rate	20%	£12,571-£50,270
Higher Rate	40%	£50,271-£125,140
Additional Rate	45%	Over £125,140

Calculating Taxable Profit

Step	Calculation
Total income	All business earnings
Minus	Allowable expenses
Equals	Net profit
This is	What you’re taxed on

Tax Examples

Net Profit	Tax Calculation	Tax Due
£20,000	20% on £7,430	£1,486
£35,000	20% on £22,430	£4,486
£55,000	20% on £37,700 + 40% on £4,730	£9,432

National Insurance

Classes for Self-Employed

Class	Amount (2024/25)	When
Class 2	£3.45/week	If profits over £12,570
Class 4	6% on £12,570-£50,270	On profits
Class 4	2% on profits over £50,270	Additional

NI Examples

Net Profit	Class 2	Class 4	Total NI
£20,000	£179	£446	£625
£35,000	£179	£1,346	£1,525
£55,000	£179	£2,356	£2,535

Allowable Expenses

What You Can Claim

Category	Examples
Office costs	Stationery, phone, postage
Travel	Business journeys (not commuting)
Clothing	Uniforms, protective equipment
Staff costs	Wages, subcontractors
Stock	Items for resale
Financial	Accountant, bank charges
Marketing	Advertising, website
Professional	Subscriptions, insurance
Premises	Rent, utilities (business % only)

Working From Home

Method	How It Works
Simplified expenses	£6/month (no evidence needed)
Proportion of costs	Actual % home used for business
Calculation	Hours working × £ per hour

Simplified Expenses Rates

Hours Worked From Home	Monthly Amount
25-50 hours	£10
51-100 hours	£18
101+ hours	£26

Vehicle Expenses

Option	How It Works
Simplified (mileage)	45p/mile first 10,000, 25p after
Actual costs	Proportion of actual car costs
Once chosen	Must stick with it for that vehicle

Mileage Example

Miles	Calculation	Allowable
8,000 miles	8,000 × 45p	£3,600
15,000 miles	(10,000 × 45p) + (5,000 × 25p)	£5,750

Record Keeping

What to Keep

Record	How Long
Income records	5 years from 31 January deadline
Expense receipts	5 years
Bank statements	5 years
Invoices sent	5 years
Bills paid	5 years

Good Practice

Habit	Benefit
Separate bank account	Easy to track
Regular bookkeeping	Less stress at return time
Digital backup	Safety
Receipt scanning	Searchable records

Software Options

Type	Examples
Free	Spreadsheets, Wave
Paid	QuickBooks, FreeAgent, Xero
MTD compliant	Most paid options

Filing Your Tax Return

Self Assessment

Method	Deadline
Paper return	31 October
Online return	31 January
Always use online	More time, immediate calculation

What You’ll Need

Information	Source
Total income	Your records
Expenses	Your records
Bank interest	Bank statements/certificates
Employment income (if any)	P60
Other income	Dividends, rental, etc.

Common Mistakes

Mistake	How to Avoid
Missing deadline	Set reminders
Wrong figures	Double-check everything
Missing income	Include all sources
Over-claiming expenses	Only business expenses
No records	Keep receipts

Payments on Account

What They Are

Concept	Explanation
Advance payments	Towards next year’s tax
Two payments	31 January and 31 July
Each is	50% of last year’s bill
First year	No payments on account

Example

Tax Year	Tax Bill	January Payment	July Payment
Year 1	£5,000	£5,000 (full bill)	£2,500 (POA)
Year 2	£6,000	£2,500 (POA) + balance	£3,000 (POA)

Reducing Payments on Account

If Income Dropped	Can request reduction
Form SA303	Or via online account
Be careful	Penalties if wrong

VAT Considerations

Do You Need to Register?

Turnover	VAT Required?
Under £90,000	Optional
£90,000+	Mandatory
Voluntarily	Possible benefits

Schemes

Scheme	Best For
Standard	Most businesses
Flat Rate	Simple businesses, possibly profitable
Cash Accounting	Cash flow help

Pension for Self-Employed

No Auto-Enrolment

Reality	Action
No employer sorts it	You must
SIPP	Tax-efficient
Personal pension	Also works
Tax relief	Still applies

Options

Provider	Type
Vanguard	SIPP
AJ Bell	SIPP
Nest	Suitable for self-employed
Pension Bee	Simple

Summary: Self-Employed Tax Checklist

Getting Started

Action	Done
Register with HMRC	☐
Set up separate bank account	☐
Choose accounting method	☐
Set up record keeping	☐
Put aside 25-30% for tax	☐

Throughout Year

Action	Frequency
Record income	Weekly
Record expenses	Weekly
Bank reconciliation	Monthly
Tax savings transfer	Monthly
Chase unpaid invoices	Regularly

Tax Year Checklist

Action	Date
Gather all records	December
File tax return	Before 31 January
Pay tax	By 31 January
Payment on account (if due)	31 July

Key Numbers to Know

Figure	Your Number
UTR number
NI number
Tax year dates	6 April - 5 April
Your tax-free allowance	£12,570
VAT threshold	£90,000

Key Contacts

Service	For
HMRC Self Assessment	0300 200 3310
TaxAid	Free help if low income
Accountant	Complex situations

Self-employed tax isn’t as scary as it seems. Keep good records throughout the year, set aside money for tax, and don’t leave your return until the last minute. If numbers aren’t your thing, an accountant often saves more than they cost.