Tax

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

Complete self-employment tax guide. Registering, record-keeping, tax returns, allowable expenses, National Insurance, and paying what you owe.

By PocketWise · · 5 min read

Tax information is based on HMRC rules for the 2026/27 tax year. Tax rules can change — always verify current rates at GOV.UK. This is not tax advice. Consider consulting a qualified tax adviser for your personal situation.

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.

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Sources

  1. HMRC — Income Tax
  2. HMRC — National Insurance