Self-Employed & Tax Returns

Understanding Self-Employment Tax in the UK

If you're self-employed in the UK, you're responsible for managing your own tax affairs. This includes registering with HMRC, keeping accurate records, and filing a Self Assessment tax return each year.

This guide covers everything you need to know about self-employment tax, National Insurance, deadlines, and how to stay compliant with HMRC regulations.

Who Must File a Self Assessment Tax Return?

You must file a Self Assessment tax return if you:

• Are self-employed as a sole trader and earned more than £1,000
• Are a partner in a business partnership
• Have untaxed income over £2,500 (e.g., from renting property or investments)
• Have income from abroad that you need to pay UK tax on
• Receive dividends from stocks and your total income exceeds £50,000
• Are a company director (unless it's a non-profit organisation and you didn't receive payment)
• Have capital gains above the annual exempt amount
• Receive Child Benefit and your income (or your partner's) is over £50,000
• Need to pay the High Income Child Benefit Charge

What You Must Do as a Self-Employed Person

• Register with HMRC as self-employed (within 3 months of starting)
• Keep detailed records of all income and expenses
• File a Self Assessment tax return every year
• Pay Income Tax and National Insurance contributions
• Make payments on account (advance payments towards next year's tax bill)

Income Tax Rates for Self-Employed (2024/25)

National Insurance Contributions (NICs)

• Class 2 NICs: £3.45 per week (if profits are £12,570 or more per year)
• Class 4 NICs: Paid on profits between £12,570 and £50,270 at 9%, and 2% on profits above £50,270
  • 9% on profits between £12,570 and £50,270
  • 2% on profits above £50,270

Construction Industry Scheme (CIS)

If you work in construction, you may be subject to CIS deductions. Under CIS, contractors deduct money from your payments and pass it to HMRC as advance payment towards your tax and National Insurance.

• Standard rate: 20% deduction (if you're registered with CIS)
• Higher rate: 30% deduction (if you're not registered)
• You can claim back CIS deductions when you file your Self Assessment tax return

Tracking Income and Expenses

You must keep records of:

• All business income (invoices, bank statements, cash receipts)
• All business expenses (receipts, invoices, mileage logs)
• Records must be kept for at least 5 years after the 31 January submission deadline

Important Deadlines

• Register for Self Assessment: By 5 October after the end of the tax year you started self-employment
• Paper tax return deadline: 31 October
• Online tax return deadline: 31 January (also the deadline for paying any tax owed)

Making Tax Digital (MTD)

From April 2026, self-employed individuals with income over £50,000 must use Making Tax Digital (MTD) compatible software to:

• Keep digital records
• Submit quarterly updates to HMRC
• File an End of Period Statement
• Submit a final declaration

From April 2027, this will apply to self-employed individuals with income over £30,000.

Start preparing now by using MTD-compatible accounting software.