How to Pay Taxes as a Self-Employed Worker in the UK

Becoming self-employed in the UK offers significant flexibility and professional independence. However, it also means taking on specific tax responsibilities. Understanding how to report your income, pay taxes, and comply with legal obligations is essential to avoid penalties and keep your finances in order.

This article explains step-by-step how to pay taxes as a self-employed individual in the UK — from registering with HMRC to filing your Self Assessment Tax Return — including eligible deductions, key deadlines, and practical tips for managing your accounts effectively.

1. Who is considered self-employed in the UK?

For tax purposes, you are considered self-employed when you work for yourself and are not under a contract as an employee. This includes freelancers, consultants, sole traders, and professionals who provide services directly to clients.

Being self-employed means you are responsible for:

Issuing your own invoices
Keeping records of income and expenses
Paying tax on your profits
Filing a Self Assessment tax return each year

2. Registering with HMRC as self-employed

The first step to paying taxes is registering with HM Revenue & Customs (HMRC). You must do this as soon as you start working for yourself, and no later than 5 October of your business’s second tax year.

You can register as a sole trader online via HMRC’s official website, providing basic information such as:

Your full name and address
The date you started your self-employment
A description of your business activity

Once registered, you’ll receive a Unique Taxpayer Reference (UTR), which is required to submit your annual tax return.

3. What taxes do self-employed people pay?

a) Income Tax

Self-employed individuals pay tax on their net profits (total income minus allowable expenses). For the 2024/2025 tax year, the UK rates are:

0% on the first £12,570 (personal allowance)
20% from £12,571 to £50,270
40% from £50,271 to £125,140
45% over £125,140

b) National Insurance Contributions (NICs)

As a self-employed person, you must also pay:

Class 2 NICs: £3.45 per week if your profits are over £12,570
Class 4 NICs: 9% on profits between £12,570 and £50,270, and 2% above that threshold

4. Submitting the Self Assessment Tax Return

Each year, you must file a Self Assessment Tax Return, usually between 6 April and 31 January of the following year. If you file online (recommended), your tax payment is also due by 31 January.

In your tax return, you must declare your income and allowable expenses, calculate the tax owed, and make the payment.

You may also be required to make payments on account — advance payments for the next tax year — due on 31 January and 31 July.

5. Allowable business expenses

Self-employed workers can deduct legitimate business expenses to reduce their taxable profits. Examples include:

Equipment, tools, and supplies
Office rent or a proportion of home office expenses
Phone and internet bills used for work
Professional services (accountants, legal advice, etc.)
Travel and business-related transport
Marketing, websites, licenses

It’s vital to keep receipts, invoices, and financial records for at least 5 years after the 31 January filing deadline.

6. Practical tips to manage your tax duties

Separate your finances: Use a dedicated bank account for your business.
Set aside tax money: Reserve 20–30% of your income for taxes and NICs.
Use accounting software: Tools like FreeAgent, QuickBooks, or Xero can simplify bookkeeping.
Seek professional advice: A qualified accountant can help you optimise deductions and stay compliant.

Need help? UKStartCompany is here for you

Paying taxes as a self-employed worker in the UK doesn’t have to be stressful. If you need tailored support, UKStartCompany offers dedicated services for freelancers, sole traders, and small business owners. Our team of tax experts can assist you with:

Proper HMRC registration
Accurate tax and NIC calculations
Self Assessment preparation and submission
Maximising your legal deductions

Trust UKStartCompany to keep your taxes under control, so you can focus on what you do best — growing your business.