People can become self-employed for many reasons. It might be a long-term career plan, sometimes it happens by chance, and sometimes it's an accident – for example applying for a job and realising they want to take you on as self-employed rather than through payroll.
Whatever the reason, it's crucial to get a good understanding of everything that needs to be done at the start of the process. This will ensure that completing your self-assessment tax return is as simple and stress-free as possible.
Registering with HMRC
If you are self-employed, you'll need to register with HMRC to get a Unique Taxpayer Reference (UTR). Without this, you won't be able to submit your return. The deadline for registering is 5 October in the year following the conclusion of your first tax year.
To clarify, if you became self-employed within the 2025-2026 tax year - tax years run 6th April to 5th April the following year - you must register by 5th October 2026.
It may be that you already have a UTR (for example, if you rent out a property). In this case, it's important to tell HMRC you're now self-employed using the form CWF1 (under If You’ve Registered Before But Did Not Send a Return Last Year on the link above).
You will also need to select your financial year. It's possible to use a financial year that doesn’t coincide with HMRC’s, however it adds complexity to your accounts. HMRC are also looking to mandate a year end of either 31st March or 5th April in the near future, so it makes sense to pick one of those dates initially to prevent the need to change in the future. This will likely mean that your first reporting year is less than 12 months. However if you need year on year reporting, there's nothing to stop you viewing your data in an alternative way. I recommend 31st March as it is much more intuitive.
Banking
I strongly advise setting up a bank account that is only for your self-employed incomings and outgoings. This will make it much easier to identify income and expenses when preparing your accounts, as there won’t be personal transactions muddying the waters. It will also take you or your accountant much less time to produce your tax return, therefore saving you either time or money.
When you want to spend the money in that account for personal use, simply transfer it over to a personal account. You may also want to make sure you are retaining a portion of your earnings in the account as a contribution towards your end of year tax bill, although this is not essential.
Software
I have written before about the use of software and why it is a good idea, so I won’t repeat myself too much except to say it should make your life easier. HMRC is introducing a system called Making Tax Digital (MTD) which will require quarterly reporting in a digital format – this will be significantly easier if you are using software to keep your records.
The rollout of MTD will be staggered depending on income:
- April 2026 for self-employed individuals earning over £50,000 (before expenses).
- April 2027 for self-employed individuals earning over £30,000 (before expenses).
- April 2028 for self-employed individuals earning over £20,000 (before expenses).
I'd recommend starting to use software prior to MTD implementation, to be as ready as you can be.
What Costs Can I Claim?
This is one of the most common questions we get asked. In general, you should be able to claim anything that is business related. If there is some element of dual usage (e.g. a phone bill that has both work and personal usage) then you will need to apportion the cost.
HMRC allow certain things as fixed allowances. The two main ones being mileage and working from home. I would recommend using both of these, for slightly different reasons.
Mileage is more beneficial to you than simply claiming petrol costs as it's also intended to cover wear and tear, tax and insurance costs.
In terms of the working from home allowance, you can either add up your bills and calculate the room useage as a portion of your total living space, or claim the set allowance. In my experience, the difference between the two calculated values is negligable. Claiming the set allowance saves time that is better spent running your business.
You can also claim a portion of your broadband bill that relates to your business useage.
Hiring an Accountant
If you have any questions, or you are in any doubt, it's always worth consulting an accountant. To that end, it's worth sharing a blog I wrote last year on whether you need an accountant.
The short answer is you are not required to hire one, and many self-employed people complete their own tax returns. However you may wish to hire one to save yourself time, utilise the knowledge and support of an accountant and have confidence that your return has been filed accurately.
Taxes
Another question that we are often asked is how much tax will I pay? This is often difficult to tell part way through the year, but there are ways to estimate it.
The below assumes that you are only self-employed. If you receive employment income, this may not apply completely to you as, for example, your personal allowance may be used up.
Income Tax
Income tax in the UK is currently:
- 0% below the personal allowance (currently £12,570),
- 20% between £12,571 and £50,270,
- 40% from £50,271 to £125,140,
- and 45% on income over £125,140.
These are marginal rates, charged on each pound depending on which band it is in.
For example, if your total earnings are £60,000, you pay 0p on every pound up to £12,570, then 20p on every pound between £12,571 and £50,270 (37,700 x 20p = £7,540) and then 40p on every pound between £50,271 and £60,000 (9,730 x 40p = £3,892). This would give a total tax bill of £11,432, an effective rate of tax of 19% on your total income.
National Insurance
On top Income Tax, you also have National Insurance (NI) contributions on your self-employed profits. Class 2 National Insurance is no longer compulsory. Self-Employed individuals earning profits below £6,845 a year can make voluntary contributions of £3.50 a week to earn a qualifying year towards their state pension. However, if your profits are over the threshold, you are classed as having already paid.
Class 4 National Insurance is charged at around 6% on profits over £12,570, and 2% on profits over £50,270. For our example of someone with £60,000 profit, they would pay 6p on every pound between £12,570 and £50,270 (£2,262) and 2p on every pound thereafter (£194.60) meaning a total of £2,456.60
VAT
The other tax to be aware of is Value Added Tax. Unless your income is excluded due to the type of work you do, you will need to register for VAT if your turnover exceeds £90,000 in any 12 month period. You therefore need to be checking monthly how much you received from customers over the previous 12 months. It is also possible to voluntarily register for VAT, so as to be able to claim back the VAT you pay on expenses. All of this is a topic for another time, but it is worth being aware of the threshold and monitoring it constantly.
What Are the Deadlines?
Aside from the registration deadline mentioned earlier, the key deadline is 31st January. This is for both filing and paying your tax return following the end of the tax year (5th April) the year before.
Obviously it's possible to file your tax return and pay your tax bill much earlier – and I would strongly recommend trying to file as early as possible. It informs you how much you need to pay by the deadline, and also helps keep your accountant less stressed!
If your income exceeds certain thresholds, then you may be required to make payments on account, meaning that you will also need to put 31st July in your calendar. This will fall in the same year as the filing deadline, so 16 months after the end of the tax year.
Any Questions?
I wrote a blog last month explaining how to pay your tax bill, which has become simpler in recent years. I also wrote one called What is Self-Employment? which may be useful if you need to know the difference between being a sole trader and working for yourself through a limited company.
If you have any questions at all, feel free to get in touch with us.
All figures correct as of 31 October 2025.
