Self-employed (UK)

To be self-employed (UK) means that you work for yourself. You don’t have a single employer but work for multiple clients, often at any one time. The money that you earn is untaxed and you’re responsible for filing a Self Assessment tax return to pay the tax you owe HMRC.

When you start working for yourself, you can register your business as one of two things:

  • Sole trader
  • Limited company

There are benefits to both, but a sole trader is the simpler of the two. It’s a good choice if you’re just starting out and is also better suited if you’re a company of one. You are not permanently tied to either and can switch from one to the other if needed. If you’re planning to hire a team, however, you’ll have to register with Companies House and set up a limited company instead.

A few things to remember if you’re self-employed in the UK

  • “Self-employed” and “sole trader” mean the same thing
  • If you own a limited company and you’re doing business through it, you’re not technically self-employed. You’re both a company director and an employee of your own company
  • You can be both employed and self-employed
  • E.g. You’re a salesperson by day, Depop seller by weekend
  • When you’re self-employed, you’ll pay the same rate of Income Tax but a slightly lower rate of National Insurance than when you were employed
  • Your first £1,000 from self-employment is tax-free – so if you earn less than £1,000 in a tax year, you won’t need to declare or pay tax on it
  • You need to register as self-employed with HMRC
  • You must submit a Self Assessment tax return every year until you tell HMRC that you’ve stopped being self-employed
  • HMRC will fine you if you forget to notify them of no longer being self-employed

Frequently Asked Questions

Search More Terms

View our latest news & insights

14 February 2024
Navigating the landscape of business taxes in the UK can seem daunting, especially given the range of taxes that might a...
Navigating the landscape of business taxes in the UK can seem daunting, especially given the range of taxes that might apply to your organization. However, understanding which taxes are relevant to your business is crucial for com...
17 January 2024
Your business has costs to deal with and pay as part of their day-to-day trade and as part of ad hoc strategies. They ty...
Your business has costs to deal with and pay as part of their day-to-day trade and as part of ad hoc strategies. They typically range from phone line bills, postage and stationery to computer software and travel costs. Being the o...