Ready to put “being your own boss” into action? Registering as self-employed in the UK is your first essential step. According to research, the number of solo self-employed individuals in the UK has increased to 4.2 million in 2023, up from 4.1 million in previous years. This growth highlights the rising trend of entrepreneurial independence.
While the registration process with HMRC might seem overwhelming at first, with the right guidance, it can be straightforward and manageable. In this detailed step-by-step guide, we’ll cover every relevant information you’ll need from choosing your business structure to completing the necessary forms, ensuring you have all the tools you need to start your self-employment journey confidently.
Let’s analyse the self-employment scenario in the UK with practical advice and clear instructions.
What is self-employment and who is considered self-employed?
Being self-employed in the UK means running your business as an individual. This status encompasses freelancers, contractors, and sole traders who manage their tax responsibilities directly.
Self-employment involves working for yourself, not as an employee. You’re self-employed if you run your business for yourself and take full responsibility for its success or failure.
Self-employed individuals can work in various capacities:
You can be self-employed in almost any field, from creative industries to professional services.
The main difference is autonomy. As a self-employed person, you:
Employees have less control but more stability, with set hours, salary, and benefits provided by their employer.
To register as self-employed with HMRC, follow these steps:
Online registration:
Visit the HMRC website and create a Government Gateway account if you don’t already have one.
Complete the online registration form for self-assessment and Class 2 National Insurance. You’ll need your personal details, National Insurance number, and business information.
By phone or post:
If you prefer, you can also register by calling the HMRC helpline or sending a completed form by post.
You must register as soon as you start trading, even if you already submit a Self Assessment tax return for other reasons like rental income. It’s quick and easy, so don’t put it off.
Before you register, make sure you have:
The quickest way to register for self-employment is online via the HMRC website. You’ll be asked about your current employment status, business information, and tax situation. Once you’ve registered, HMRC will send you a UTR (Unique Taxpayer Reference) number in the post. Keep this safe – you’ll need it for filing your tax returns.
Your UTR is a 10-digit code assigned to you by HMRC when you register as self-employed. It’s used to identify you for tax purposes. You’ll receive your UTR in the post within 10 days of registering. If you don’t receive it or lose it, contact HMRC. Your UTR is required when filing your self assessment tax return and other tax-related paperwork. It’s advisable to keep this noted down in a safe place, as it can be a pain to chase up if misplaced.
When starting out self-employed, you’ll need to decide on a business structure. The two most common options for self-employed individuals are sole trader and limited company .
Sole traders have complete control over their business and finances. It’s the simplest business structure with minimal reporting requirements. However, sole traders have unlimited liability – meaning your personal assets could be at risk if things go wrong. You’re also more limited in terms of funding options and tax planning.
Not sure what is the sole trader tax rate in Australia? Fret not, we have created a bite-sized guide on all you need to know.
Limited companies offer limited liability, shielding your personal assets. They can be more tax-efficient and provide a professional image. On the downside, limited companies involve more paperwork, strict reporting, and public disclosure of information. There are also costs involved in incorporation and running a company.
Not sure what’s the difference between sole trader vs limited company? We have created an in-depth guide to help you decide on which is the perfect fit for you.
When deciding, consider:
Our accountants at Sleek can advise on the best structure for your circumstances.
As a self-employed person, you’re responsible for calculating and paying your own taxes. This means keeping accurate records and understanding your tax obligations.
Good record-keeping is essential for filing your tax return and claiming expenses. Keep track of all your:
Self-employed individuals must file a self assessment tax return each year. Key deadlines (approximately, check updated dates for 2024):
Set reminders to avoid accidentally missing a deadline and incurring penalties. HMRC has an online calendar to help you keep track.
You can deduct allowable expenses from your income when calculating your taxable profit. Allowable expenses include:
Keeping detailed records is key to claiming all the deductions you’re entitled to. I learned that the hard way after missing out on some expenses in my first year.
In addition to income tax, self-employed individuals must pay National Insurance contributions (NICs). NICs entitle you to certain state benefits and the State Pension.
Self-employed people pay two types of NICs:
HMRC calculates your NICs based on your Self Assessment tax return. You pay them along with your income tax. As of 2024/25, Class 2 NICs are £3.45 per week. Class 4 NICs are 9% on profits between £9,881 and £50,270, and 2% on profits over £50,270. You can budget for these contributions throughout the year to avoid a big bill at tax time.
If your profits are below the thresholds, you can make voluntary Class 2 NICs to maintain your NI record. This helps fill gaps to qualify for benefits and the State Pension. You may also consider voluntary contributions if you have gaps in your record, like periods living abroad.
Once you’re registered as self-employed, you have an ongoing responsibility to keep HMRC informed of any changes to your circumstances.
You must tell HMRC if you:
Make sure to update them promptly to avoid any issues.
It’s also important to keep your personal details up to date, including your:
You can update most details online via the HMRC website or by contacting them directly.
The Government Gateway is your online portal for managing your tax affairs. You can use it to:
Log into your Government Gateway account regularly to stay on top of your taxes and ensure everything is in order. Navigating self-employment taxes can seem overwhelming at first, but with good organization and staying informed, you’ll master it in no time. Remember, HMRC is there to help, so don’t hesitate to contact them with any questions.
Key takeaway:
Jumping into self-employment in the UK means taking control of your work and taxes. From choosing clients to handling your own tax affairs, it’s all on you. Whether you’re a freelancer or setting up a limited company, get started by registering with HMRC – don’t delay. Keep records tidy for tax time, understand your deadlines, and remember: good planning pays off.
Registering as self-employed in the UK might seem daunting at first, but it’s a crucial step in launching your own business. By choosing the right structure, keeping accurate records, and staying on top of your taxes and National Insurance contributions, you’ll be well on your way to success.
If you’re feeling stuck and need professional help, just reach out to our friendly experts at Sleek. Our team will help you with any requirement related to business registration, accounting, bookkeeping,
To kick off, go to HMRC’s website and follow their step-by-step guide. You’ll need your personal info handy. This move officially starts your journey in the self-employed UK scene.
Log into the Government Gateway on HMRC’s site. Choose ‘register for taxes’ and pick ‘self-employment’. Fill out the form with your details.
If you’re pulling in over £1,000 from freelancing or selling goods, it’s time to sign up with HMRC. It keeps things legit tax-wise.
Absolutely. Being a sole trader doesn’t mean setting up a formal business structure like a limited company. Just make sure you tell HMRC about your earnings straight away.
