If you're freelancing or running a business as a sole trader in the UK, you must register with HMRC as self-employed as soon as you start trading. Technically you must register by 5 October of the second tax year in which you're trading (e.g., if you started in March 2024, register by 5 October 2025).
You can register online at gov.uk/register-for-self-assessment. Once registered, you'll receive a Unique Taxpayer Reference (UTR) — a 10-digit number you'll use for all tax correspondence. Keep this safe.
You must also register for VAT if your annual taxable turnover exceeds £90,000 (see our VAT guide for more detail).
Income Tax and the Personal Allowance
As a freelancer, you pay Income Tax on your profits — that's your income minus allowable expenses — not on your total revenue.
The UK Income Tax bands for the tax year 2025/26 (England, Wales, and Northern Ireland) are:
Band
Taxable income
Tax rate
Personal Allowance
Up to £12,570
0%
Basic rate
£12,571 – £50,270
20%
Higher rate
£50,271 – £125,140
40%
Additional rate
Over £125,140
45%
Personal Allowance taper: The £12,570 Personal Allowance is reduced by £1 for every £2 of income above £100,000. If you earn over £125,140, you lose the Personal Allowance entirely and pay 40% on all income above £0 (in practical terms, this creates an effective 60% rate on income between £100,000 and £125,140).
Scotland
Scotland has its own Income Tax rates, with six bands. The starter rate (19%) applies from £12,571 to £14,876, then 20% (basic), 21% (intermediate), 42% (higher), 45% (advanced), and 48% (top rate above £125,140). National Insurance rates remain the same across the UK.
National Insurance Contributions
As a self-employed person, you pay two types of NICs:
Type
When
Rate 2025/26
Class 2 NICs
If profits ≥ £12,570/year
£3.45/week (flat rate)
Class 4 NICs
On profits between £12,570 and £50,270
6%
Class 4 NICs (higher)
On profits above £50,270
2%
From April 2024: Class 2 NICs are no longer paid separately. If your profits exceed the Small Profits Threshold (£12,570), Class 2 NICs are treated as paid automatically when you file your Self Assessment return, without any additional action required.
Unlike employees who pay Class 1 NICs at 8% (up to £50,270), freelancers pay the lower Class 4 rate of 6% — a saving of 2 percentage points on income up to the higher rate threshold.
Allowable expenses for freelancers
One of the biggest tax advantages of freelancing is being able to deduct business expenses from your income before calculating tax. An expense is allowable if it's incurred "wholly and exclusively" for business purposes.
Office and home working
Rented office space: 100% deductible.
Working from home: You can claim a flat rate of £6/week (£312/year) without receipts, or calculate actual costs based on the proportion of your home used for work.
Office furniture and equipment: Desk, chair, monitors, printer — 100% in the year of purchase under the Annual Investment Allowance.
Technology and software
Computer, laptop, tablet — if used exclusively or mainly for work.
Business phone and proportion of mobile bill used for work.
Broadband — proportion used for business if at home.
Travel
Train, bus, taxi fares for client visits (but not commuting to a regular place of work).
Car mileage at HMRC approved rates: 45p/mile for first 10,000 miles, 25p/mile thereafter.
Flights and accommodation for genuine business travel.
Parking fees and congestion charges for business journeys.
Professional services
Accountant or bookkeeper fees.
Legal fees related to your business.
Professional indemnity or public liability insurance.
Membership of professional bodies.
Marketing and client costs
Website hosting, domain names, web design.
Advertising and social media promotions.
Business cards, brochures, promotional materials.
Training and development
Courses, workshops, and training directly related to your existing work.
Books, magazines, subscriptions relevant to your field.
Conference fees when attending for business purposes.
What you CANNOT deduct
Personal clothing (even if you only wear it for work — unless it's a uniform or protective gear).
Entertaining clients (business entertainment is not deductible for tax purposes).
Fines and penalties (parking fines, tax penalties).
Your own salary (as a sole trader, drawings are not an expense).
Capital purchases that will last many years (these are handled through capital allowances instead).
Self Assessment: key dates and how to file
As a freelancer, you file a Self Assessment tax return each year to declare your income and expenses. The UK tax year runs from 6 April to 5 April.
5 April
End of the tax year. Your income and expenses for the year are finalised.
5 October
Deadline to register for Self Assessment if you're filing for the first time.
31 October
Deadline for paper Self Assessment returns (very few people use this route).
31 January
Deadline for online Self Assessment returns AND payment of any tax owed. Also the deadline for first payment on account.
31 July
Deadline for second payment on account.
The penalty for missing the 31 January deadline is £100 immediately, plus further daily penalties of £10/day after 3 months (up to £900), plus interest on unpaid tax.
Payments on account
If your tax bill exceeds £1,000, HMRC requires you to make two advance payments toward the following year's tax bill, called payments on account:
First payment: 31 January — 50% of your previous year's tax bill.
Second payment: 31 July — another 50%.
This can be a shock in the first year: on 31 January you pay your first year's tax plus the first payment on account for the following year — effectively 150% of one year's tax in one go. Planning for this is essential; many freelancers set aside 25–30% of every invoice payment in a dedicated tax savings account.
Record-keeping requirements
HMRC requires you to keep records of all your income and expenses for at least 5 years after the 31 January submission deadline of the relevant tax year. For the 2024/25 return (due January 2026), you must keep records until at least January 2031.
Good records to keep:
All invoices you've issued (our free generator saves these automatically).
Bank statements showing money received.
Receipts for all business expenses.
Mileage log (date, purpose, start and end location, miles).
Any contracts or agreements with clients.
Cloud accounting software makes this much easier. Alternatively, a simple spreadsheet with income and expense columns works well for sole traders with simpler finances.
Tax-saving tips for freelancers
Claim all allowable expenses: Many freelancers miss legitimate deductions. Keep every receipt and categorise expenses properly.
Use the Trading Allowance: If your income is under £1,000/year, you're exempt from tax and NICs — no Self Assessment required.
Pension contributions: Contributions to a personal pension reduce your taxable profits and attract basic rate tax relief at source (effectively the government adds 25% to your contribution).
Time large purchases: Buying equipment before the end of the tax year (5 April) gets you the deduction a year earlier.
Spread income across tax years: If possible, timing when you invoice can help you stay in lower tax bands.
Set aside tax as you earn: Many freelancers set aside 25–30% of each payment received into a separate "tax pot" account, so there are no nasty surprises in January.
Hire an accountant: For most freelancers, the cost of a good accountant (typically £300–£800/year for sole traders) is offset by the tax savings and peace of mind they provide.
Calculate your take-home pay as a freelancer
Our UK net salary calculator shows Income Tax, NICs, and what you actually keep. Instant results.