A guide to paying freelance tax

Working as a freelancer can be great. After all, you will get all the benefits, especially regarding flexibility. You get to choose your working hours and location. Furthermore, you will have the option to work remotely.

After the Covid-19 pandemic, things have changed significantly. With work from home becoming common, more people wanted to work remotely. As a result, many people switched to full-time freelancing. This played an important role in helping them achieve the flexibility of working as per their condition.

A guide to paying freelance tax

The UK freelance tax system

If you’re a freelancer in the UK, you must be aware of the tax system. The HM Revenue and Customs is responsible for collecting and allocating the tax, especially for self-employed individuals.

Freelancing has become quite common in today’s terms. If you’re a freelancer in the UK, you will be classified as the sole trader or partner in business. The HMRC will provide you with a guideline on determining the work status.

If you’re working in the UK, you must pay the National Insurance Contributions (NICs). You will also need to pay VAT if you cross the income threshold. After filling out the self-assessment return, you will need to pay the tax annually. The same tax rate will be applicable for residents and non-residents. However, there are slight variations in terms of rules.

Registering for freelance tax in the UK

If you are a freelancer in the UK and have made £1000 or more, you must provide the details to HMRC. You can also report the details online. The second-year tax usually has a registration date of October 5. You must know when the business began operating.

If you want to apply for the self-assessment online service, you must send a letter to the HMRC requesting UTR. The UTR stands for Unique Taxpayer Reference. The letter will come with the activation code to be sent within 10 working days. However, the deadline extends to 21 days if you’re in a foreign land.

You will complete the registration procedure by entering the code and UTR number. It is advisable to complete the registration process online. You will get the information only about the company. The authorities will provide you with details regarding contact information and trading name.

Tax for self-employed sole traders and freelancers in the UK

As a self-employed professional, the amount of tax you pay will depend on various conditions. You first need to understand how much money you’re making. Furthermore, it is also advisable that you’re aware of the allowable expenses.

Once you get these details, you can calculate the profit. When calculating the taxable profit, you must be aware of your business-related expenses. Since you are the business’s sole owner, every profit will belong to you only. The tax on profit for the sole traders may be added to the personal income. Therefore, you must keep a check on the tax rate as well.

For the current year, the tax details for self-employed and freelancers are as follows:

England/Wales/Northern Ireland tax band Taxable income Income tax rate
Personal allowance Up to £12,570 0%
Basic rate £12,571–50,270 20%
Higher rate £50,271–150,000 40%
Additional rate £150,001+ 45%

However, for Scotland, the taxable income is slightly different. The tax details for freelancers and self-employed professionals is given as follows:

Scotland tax band Taxable income Income tax rate
Personal allowance £12,570 0%
Starter Rate Over £12,571*–14,732 19%
Scottish Basic Rate Over £14,732–25,668 20%
Intermediate Rate Over £25,668–43,662 21%
Higher Rate Over £43,662–£150,000 41%
Top Rate Over £150,000 46%

How to pay tax as a freelancer in the UK?

If you do not have expertise in paying taxes as a freelancer, you are likely to have problems. As a result, various factors will affect the income tax bill. As a result, filing the tax for HMRC can be slightly difficult for you. As a freelancer, your tax obligations will be the same as that of a sole trader. If you have registered with the HMRC as a sole proprietor, you must pay the taxes accordingly.

You must comply with the regulations if you want to work as a freelancer in the UK within your limited company. You must be familiar with the limited company to get the benefits. The HMRC usually will charge the tax depending on the type of business entity you have. Apart from that, they will also take into consideration the working conditions. To establish a startup, you must also be familiar with the prerequisites.

Allowable expenses as a freelancer

Once you understand whether you are eligible to pay taxes in the UK or not, you will need to determine your expenses. You should evaluate the taxes to meet the everyday needs, especially for the company. Creative freelancers can earn a significant sum of benefits, especially in terms of tax cuts and reliefs. However, this is only possible when you know the deductible costs across the tax returns.

If you want to reduce your tax as a freelancer, there are various items you can include to claim the expenses. This is important for your business to determine faster and easier results in the long run. Some of the items that you must include are as follows:

  • Cost that subcontractor or employee needs to incur.
  • Any element in which you spent that was an important part of your project.
  • Commissions that you had to pay when the work was sold.
  • The fees related to IT services, especially in terms of portfolio designing and site creation.
  • The price for consultation and accounting services.


Freelancing is a great career option. However, you must sign up with the HMRC to get all the benefits. As a freelancer, you must know the tax options to make the right choice. Once you are done with the planning, you can schedule your tax payments accordingly. You can consult an accountant to help you in the process. Depending on that, you will need to take action.

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