A complete guide to freelancing and UK tax for freelancers

If you are a freelancer in the UK, you need to know when you should start paying the freelancer tax. According to a government survey in the UK, around 4.1 million are self-employed or work for themselves. If you are one of them, you must pay the freelancer tax. However, the first step is registering as a self-employed professional in the UK.

When you have your business in the UK, you will need to pay different types of taxes, income tax and value-added tax (VAT) being the important ones. There were significant changes in the off-payroll working rules (IR35) that applies to all self-employed professionals in the UK. Continue reading to learn more about freelance tax in the UK.

The freelance tax system in the UK

The HM Revenue and Customs (HMRC) collects and allocates the taxes and disbursements for all self-employed workers. When it comes to paying taxes, the term freelancing does not hold to be valid. Freelancers are often classified as sole traders or partners in any business. If you are working for yourself, you must go through the HMRC guide. It will help you realise and understand the self-employment status.

If you work for yourself in the UK, irrespective of your business model, you will have to pay National Insurance Contributions (NICs), VAT and Income tax. You can pay taxes by filling out the self-assessment return every year. The rates will be applicable for residents and non-residents.

If you pay the taxes, it will be categorised depending on various factors. Some of these factors include:

  • Have your own British real estate
  • Working in the United Kingdom
  • Have stayed in the UK for a minimum of 183 days

If you satisfy these criteria, you will be considered a resident for paying the taxes. On the other hand, if you work for yourself as a part of a limited company, you will be liable for paying UK corporation tax. In this case, a different set of rules will apply to you.

What are the penalties for filing a late tax return?

When do I pay the taxes as a freelancer?

If you are freelancing in the UK, you must declare self-employment earnings by the 31st of January. It will be applicable for the end of the tax year by the 5th of April. The money that you earn is untaxed. Therefore, you will have to declare it to HMRC within the deadline.

What to do as a new freelancer?

If you are a new freelancer in the UK, you must ensure that you follow the steps properly. This helps to ensure that you are paying the taxes within the time. Below are all the things you may need to follow as a new freelancer in the UK:

Fill out the self-assessment form by HMRC

  • Register: You can register on the official website for self-assessment to inform that you are self-employed.
  • Keep an eye on the deadline: If you want to register as a freelancer in the UK, you must do it on October 5, after the end of the financial year. Make sure to register within the deadline to prevent any penalties.
  • UTR: Once you have registered on the platform as self-employed personnel, you will receive a letter within 10 days that will contain information about your UTR. The UTR is the 10-digital unique taxpayer reference number that might be useful for you while paying taxes.
  • Online Account Setup: Once all the steps mentioned above have been followed, HMRC will set up your online self-assessment account. Hence, you can file your tax returns via the online account during the due course of time.

Register for VAT

When filing for a self-assessment return with HMRC, you must also register for VAT. Currently, in the UK, you must pay 20% as VAT. However, it is more of a choice because if you earn around £85,000, you must register with HMRC, or it is voluntary.

After registering, you will receive a confirmation regarding your VAT number and essential dates as to when you will have to submit the first return and payment. VAT registration can take some time, so you will have to wait for confirmation.

If you’re not earning enough to register for VAT, it is advisable to register for one. This is mostly because it adds professionalism and credibility to your business. You should maintain a good track of all your earnings so that you can charge VAT accordingly on it. Often, you will need to submit the return every three months.

How much tax do I have to pay as a freelancer?

As a freelancer, figuring out how much taxes and National Insurance payments you need to make can be tricky. If you are employed with any organisation, they are usually responsible for caring for such things. As a freelancer, you must pay taxes twice a year, referred to as “payment on accounts.” The payment will further depend on the profit you made that year which will be exclusive of the expenses from your total income.

What can I expense as a freelancer?

Having expenses ensures that you need money to run the business. However, if you are claiming these expenses, it should completely depend on the fact that you are using them for business. The major aspects that you can claim as an expense as a freelancer in the UK include:

  • Travel
  • Staff Salary
  • Marketing & Website
  • Insurance
  • Training Courses


Paying freelance tax in the UK can be complex and daunting, but every freelancer must comply with the tax laws and regulations. As a freelancer, you are responsible for keeping accurate records, calculating your tax liabilities, and submitting your tax returns on time. By following the guidelines outlined in this guide, you can navigate the UK tax system more confidently and ensure that you pay the correct amount of tax on your freelance income.

Keep track of your expenses and deductions, and seek professional help if unsure about your tax obligations. By staying on top of your tax responsibilities, you can avoid penalties, keep your finances in order, and focus on building your freelance business.

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