The Essential Guide to Tax for UK Freelancers

For freelancers working in the UK, it is crucial to have a clear understanding of tax requirements and regulations to prevent legal violations and fines. This handbook offers a comprehensive summary of all the necessary information related to tax for freelancers in the UK.

Registering for Self Assessment as Self Employed

In case you work as a freelancer sole trader and earn over £1,000 in a tax year, it is necessary to enroll for Self-Assessment with HM Revenue & Customs (HMRC). This implies that you will have to submit an annual tax return and settle any tax owed by the given deadline.

You have the option of registering for Self-Assessment electronically via the HMRC website or by mailing in the appropriate paperwork. After registration, a Unique Taxpayer Reference (UTR) number will be issued to you, which must be included on all tax returns.

Calculating Your Tax Bill

If you work as a freelancer, you will have to pay income tax and National Insurance contributions (NICs) based on your earnings. The amount of tax that you are required to pay will be determined by your income and tax allowances.

In the tax year 2022/23, you won’t be required to pay any income tax on earnings up to £12,570, as it is the tax-free personal allowance. Any earnings above this amount will be taxed at the applicable tax rates as below:

Basic rate (up to £50,270): 20%

Higher rate (£50,271 to £150,000): 40%

Additional rate (over £150,000): 45%

If your annual profits exceed £6,515, you must pay Class 2 NICs, and if they exceed £9,568, you must also pay Class 4 NICs. The current weekly rate for Class 2 NICs is £3.05, while Class 4 NICs are charged at a rate of 9% on profits between £9,568 and £50,270, and 2% on profits above £50,270.

As a freelancer, it is crucial to bear in mind that you are tasked with the responsibility of computing your own tax payments and submitting them punctually. HMRC will furnish you with a tax computation once you have submitted your tax returns, but it is your responsibility to guarantee that the information you give is precise.

Keeping Accurate Records

Keeping precise records of your income and expenses such as invoices, receipts, and bank statements is crucial in accurately calculating your tax bill..It is advisable to maintain a record of all the expenditures related to your business, such as travel expenditures, equipment costs, and office rent. This can be advantageous as you are allowed to deduct these expenses from your earnings before tax computation, resulting in a lower tax payment.

Claiming Expenses

As an independent contractor, you have the right to declare certain costs as write-offs for tax purposes, which may effectively decrease the amount you owe. Qualifying expenditures consist of:

  • Office rent
  • Travel expenses
  • Equipment costs
  • Professional fees
  • Marketing and advertising costs
  • Business insurance premiums
  • Bank charges and interest
  • Cost of goods sold

Maintaining precise documentation of your expenditures, and verifying that they are legitimate business-related expenses, is crucial. HMRC might request proof of your expenses, hence it is vital to retain receipts and invoices.

Paying Your Tax Bill

Freelancers are obligated to make advance payments for their upcoming tax bill, which are based on the previous year’s amount and need to be paid by January 31st and July 31st annually.

If your tax bill for the current year is higher than your payments on account, you will need to make a balancing payment by 31 January following the end of the tax year. If your payments on account are higher than your tax bill, you will then claim tax refund of overpaid tax.

It is important to ensure that you make payments on time to avoid penalties and interest charges. HMRC provides a range of payment options, including online banking, direct debit, and payment by debit or credit card.

VAT Registration

If your yearly revenue exceeds £85,000, you will need to enroll for VAT. This indicates that you will have to impose VAT on the items and services you offer, and send VAT reports to HMRC.

Companies that are registered for VAT must maintain precise records of their VAT dealings and file VAT returns digitally at least once every three months. Additionally, it may be possible to obtain reimbursement of VAT on business expenditures like office space and equipment fees.

It is crucial to make sure that you register for VAT within the allotted time and follow all VAT rules. Neglecting to do so may lead to fines and additional fees.

National Insurance Contributions

If you work as a freelance worker, it is mandatory for you to make payments towards your National Insurance contributions (NICs) based on your earnings. The sum of your NICs will vary depending on the profits you make and the National Insurance category you fall under.

If you work as self-employed and make more than £6,515 annually, you will have to pay Class 2 NICs, which are currently charged at £3.05 per week.

In case your earnings exceed £9,568 annually, you must pay Class 4 NICs. For profits ranging between £9,568 and £50,270, the Class 4 NIC rate is 9%, while for profits over £50,270, it is 2%.

To avoid incurring penalties and interest fees, it is crucial to ensure that you make timely payments of your NICs. This can be accomplished by utilizing the HMRC website to submit payments online or by establishing a direct debit.

IR35 Regulations

The intention of the IR35 rules is to stop freelancers who utilize a limited company to evade taxes. If you work as a freelancer through a limited company, you could be impacted by the IR35 regulations.

According to the IR35 rules, if you are classified as a disguised employee, you will have to pay taxes and NICs as if you were a client’s employee. Consequently, you will not be able to take advantage of the tax benefits that come with operating through a limited company.

It is crucial to comprehend the IR35 rules and adhere to applicable laws to avoid facing fines and interest fees.


For freelancers in the UK, paying taxes can seem overwhelming. Nonetheless, by obtaining proper advice and assistance, it is feasible to manage the intricate tax structure and guarantee that you follow the regulations.

You can guarantee that you accurately calculate your tax bill and make timely payments by enrolling in Self-Assessment, maintaining precise records, and At YRF Accountants, we understand that managing taxes as a freelancer can be daunting. Our team of experienced accountants can assist you in managing your taxes, providing guidance on VAT registration, National Insurance contributions, and IR35 regulations.

How YRF Accountants Can Help You?

YRF Accountants in Bolton has a team of experienced accountants who can assist you in managing your taxes as a freelancer. We understand the intricacies of the tax system and can provide you with expert advice on VAT registration, National Insurance contributions, and IR35 regulations.

Our services include assisting you with Self-Assessment, maintaining accurate records, and ensuring that you make timely payments to avoid penalties and interest fees. We can also help you understand the tax benefits that come with operating through a limited company.

Our goal is to help you manage your taxes in a stress-free manner, allowing you to focus on expanding your business. Our team of experts will work closely with you to create a customized tax plan that meets your specific needs.

At YRF Accountants, we are committed to providing our clients with comprehensive and reliable tax services. Contact us today to learn more about how we can help you manage your taxes as a freelancer.