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When you work for yourself, sorting your taxes can feel like a daunting task. Most of the time you won’t have a full-time finance team taking care of it behind the scenes – it’s just you, your income and HMRC. While that may not sound like much fun, once you understand the basics, self-employment tax doesn’t have to be something you dread doing.

Whether you’ve just started a business or are looking for a refresher, we can’t overstate how important it is to develop an understanding of tax implications for the self-employed. Getting it right can help you save money, stay compliant and plan with confidence.

This guide breaks down several principles of self-employment tax in the UK, from Income Tax and National Insurance to expenses, deadlines and what to consider if you’re thinking about going limited. As every business and circumstance is different, we would always recommend seeing your own professional advice as well.

Note that all the information we’ve included in this article is correct on the date it was written but may be subject to change.

What is self-employment tax?

Let’s start with the big picture. Self-employment tax isn’t just one tax — it’s a mix of different responsibilities you take on when you work for yourself. If you’re a sole trader, you’ll need to report your income to HMRC and pay:

• Income Tax on your profits
• National Insurance contributions (or NICs)
• Possibly VAT, if your turnover exceeds the threshold

If you’re coming from an employed job, self-employment demands a change in your mindset. Instead of an employer automatically taking your tax from your pay packet, you’re in charge of tracking your earnings and submitting a Self Assessment tax return each year. Keeping records, understanding what you can claim and knowing the key deadlines are essential practices.

Registering as self-employed

Before you do anything else, you’ll need to let HMRC know you’re working for yourself. You can register as a sole trader online at GOV.UK. After registering, you’ll get a Unique Taxpayer Reference (UTR) number, which will be used in your self-assessment submission.

You must register by 5th October in your business’s second tax year. Miss the deadline, and you could be hit with a fine.

Income Tax: what you need to pay

Income Tax applies to your profits, not your total income. That means you can subtract allowable expenses (more on those in a moment) before working out how much tax you owe.

For the 2024/25 tax year, the rates are: