Self-employed

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

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