Do I need to register as self-employed in the UK?

Yes. You must register with HMRC as self-employed if your self-employment income exceeds £1,000 in a tax year (the trading allowance). Registration is done online via HMRC's website and you must file a Self Assessment tax return each year by 31 January.

How much tax do self-employed people pay in the UK?

Self-employed people pay income tax on profits above the £12,570 personal allowance (20% basic rate, 40% higher rate, 45% additional rate) plus Class 4 National Insurance at 6% on profits between £12,570–£50,270 and 2% above that. Class 2 NI (£3.45/week) is included in Self Assessment for those with profits above £12,570.

When is the Self Assessment deadline?

The online Self Assessment deadline is 31 January following the end of the tax year. So for the 2025/26 tax year (ending 5 April 2026), the deadline is 31 January 2027. Paper returns must be filed by 31 October. Any tax owed must also be paid by 31 January.

Should I be a sole trader or limited company?

At lower profit levels (typically below £30,000–£40,000), sole trader status is simpler and tax-efficient. Above that, a limited company can save tax through the salary-plus-dividends strategy, though it involves more admin, accountancy costs, and corporation tax filing. The decision depends on profit level, risk appetite, and client requirements.

What is the VAT registration threshold for self-employed people?

You must register for VAT if your VAT-taxable turnover exceeds £90,000 in any 12-month rolling period. You can also register voluntarily below this threshold, which can be beneficial if your customers are VAT-registered businesses that can reclaim input VAT.

UK Self-Employment Hub 2026/27 — Tax, VAT & Freelancer Tools

Common UK self-employed tax pitfalls and how to avoid them

UK sole traders and limited company directors face several recurring tax pitfalls that catch even experienced contractors. The most common: under-budgeting for the January Self Assessment payment + first payment on account, which together can consume 65-70% of the prior year's tax bill in a single month. A £15,000 SA bill becomes a £25,000 January demand when payments on account are added — sole traders should reserve about 30-35% of every invoice received into a separate tax savings account from day one.

Other common pitfalls: missing the National Insurance Class 4 second band (2% above £50,270) when budgeting for higher-income years; assuming "expenses" automatically reduce tax (only "wholly and exclusively for trade" expenses qualify — your gym membership and lunch out don't); over-claiming home-office costs (HMRC permits a flat £6/week or a proportional calculation, but the proportional method requires careful evidence); forgetting that VAT registration becomes compulsory at the £90,000 12-month rolling turnover threshold (registering late incurs a 15-30% penalty on undeclared VAT).

Best practice: file Self Assessment in the autumn (September-October) rather than the December rush — HMRC's online system is markedly faster and more responsive in October than in late January. Always retain records for 5 years and 10 months after the end of the tax year. Use HMRC-recognised bookkeeping software (FreeAgent, Xero, QuickBooks, Sage) — Making Tax Digital for Income Tax (MTD-ITSA) becomes mandatory for sole traders and landlords with turnover above £50,000 from April 2026, dropping to £30,000 from April 2027, and £20,000 from April 2028.

Written and reviewed by the UKCalc Editorial Team. UKCalc’s calculators and analysis are built and maintained using verified statutory data and official sources. Published by Animateed Limited. About UKCalc · Editorial policy · Methodology

Last reviewed: 9 August 2026 · Rates: 2026/27 tax year unless stated otherwise.

UK Self-Employment Hub 2026/27

Self-Employment Calculators

Self-Employment Guides

Also useful for self-employed people

Common UK self-employed tax pitfalls and how to avoid them