Self Assessment for Freelancers

Do you need to do Self Assessment?

If you are self-employed as a sole trader and earn more than £1,000 from self-employment in a tax year, you must register for and complete a Self Assessment tax return. This applies regardless of whether you also have a PAYE job. You report your income and expenses so HMRC can calculate how much Income Tax and National Insurance you owe.

The UK tax year runs from 6 April to 5 April. For example, the 2025/26 tax year covers 6 April 2025 to 5 April 2026.

Registering for Self Assessment

You must register with HMRC by 5 October in the second tax year of your self-employment. So if you became self-employed during the 2025/26 tax year, you must register by 5 October 2026.

Registering late can result in a penalty. You register online at gov.uk — once HMRC processes your registration, they will send a letter with your Unique Taxpayer Reference (UTR), which you need to file your return.

Key deadlines

Missing HMRC deadlines triggers automatic penalties. Here are the dates every freelancer needs to know:

• 5 October — deadline to register for Self Assessment (if new to self-employment)
• 31 October — deadline to file a paper tax return
• 31 January — deadline to file your online tax return AND pay your tax bill in full
• 31 July — second payment on account deadline (see below)

The most important date is 31 January. This is when you must both submit your return online and pay whatever you owe for the previous tax year. If you miss it, you face an immediate £100 penalty even if no tax is due.

Late filing penalties

• 1 day late: £100 fixed penalty
• 3 months late: £10 per day (up to 90 days, max £900)
• 6 months late: 5% of the tax due or £300, whichever is higher
• 12 months late: a further 5% of tax due or £300

Interest is charged separately on any unpaid tax from 1 February.

Payments on account

“Payments on account” catches many freelancers off guard in their first year. If your Self Assessment tax bill exceeds £1,000, HMRC requires you to prepay towards the nextyear's bill in two instalments:

• First payment on account: 31 January (same deadline as settling last year's bill)
• Second payment on account: 31 July

Each payment is 50% of last year's tax bill. So if you owed £3,000 for 2024/25, you must pay £1,500 by 31 January 2026 and another £1,500 by 31 July 2026 — on top of settling 2024/25 itself.

This means your first significant tax bill can feel like a triple whammy: last year's tax plus two payments toward this year. The solution is to set aside a proportion of every payment you receive — roughly 25–30% is a safe rule of thumb for basic-rate taxpayers, more if you earn above £50,270.

If you expect your income to fall significantly this year, you can apply to reduce your payments on account using form SA303. Do not just pay less without applying — HMRC will charge interest on any shortfall.

What expenses can you claim?

You can deduct expenses that are incurred “wholly and exclusively”for the purpose of your trade. The key word is “exclusively” — if something has a personal element, you can only claim the business proportion.

Allowable expenses for most freelancers

• Home office costs — if you work from home, you can claim a proportion of your broadband, phone, electricity, and heating. HMRC offers a simplified flat rate of £10/month (up to 25 hours), £18/month (25–50 hours), or £26/month (50+ hours) per month, or you can calculate actual costs
• Professional subscriptions — annual memberships to industry bodies, software subscriptions (design tools, project management, accounting software), stock libraries
• Equipment — laptops, monitors, keyboards, cameras, microphones (see capital allowances below)
• Marketing — website hosting, domain names, advertising, business cards, promotional materials
• Training — courses, books, and conferences directly relevant to your current trade (not to start a new one)
• Travel — train tickets, bus fares, parking, and mileage for business journeys (not commuting to a regular place of work)
• Stationery and postage — paper, printer ink, postage for business correspondence
• Professional fees — accountant fees, legal advice, insurance premiums
• Bank charges — fees on a dedicated business bank account

Capital allowances

For larger purchases (equipment, computers, furniture), the Annual Investment Allowance (AIA) lets you deduct the full cost in the year you buy the item rather than depreciating it over time. The AIA limit is currently £1,000,000 per year — far more than any freelancer is likely to spend.

What you cannot claim

• Your own salary or drawings (you are taxed on profit, not salary)
• Client entertaining (meals and events with clients are not deductible)
• Fines and penalties
• Personal clothing, even if you wear it to client meetings
• Anything with a significant personal use element unless you can demonstrate a clear business proportion

The Trading Allowance

If your self-employment income is £1,000 or less in a tax year, you can claim the Trading Allowance and pay no tax on it — and do not need to register for Self Assessment. This is useful for very small side projects or occasional freelance work.

If your income is above £1,000, you choose: either claim the £1,000 flat allowance (simplest, no receipts needed) or claim your actual expenses (better if your costs exceed £1,000). You cannot do both.

National Insurance for sole traders

Sole traders pay two classes of National Insurance:

• Class 2 NIC: from April 2024 you no longer pay Class 2 separately — it is now included in your Self Assessment calculation if your profits exceed the Small Profits Threshold (£6,845 in 2025/26). It provides access to the State Pension and some benefits
• Class 4 NIC: 6% on profits between £12,570 and £50,270; 2% on profits above £50,270 (2025/26 rates)

Both are calculated and collected through Self Assessment — no separate registration needed.

Income Tax bands for 2025/26

After deducting your allowable expenses and the Personal Allowance (£12,570), income tax is charged at:

• Basic rate: 20% on taxable income up to £37,700
• Higher rate: 40% on taxable income from £37,701 to £125,140
• Additional rate: 45% on taxable income above £125,140

Note: your Personal Allowance is tapered and lost entirely once income exceeds £125,140.

Record-keeping requirements

HMRC requires you to keep records for five years after the 31 January deadline for the relevant tax year — effectively around six years. You must keep:

• All invoices you issue
• Receipts and purchase invoices for every expense you claim
• Bank statements for your business account
• Mileage logs if you claim vehicle costs

Digital records are fully acceptable — you do not need paper. A dedicated invoicing tool and a folder of scanned receipts is sufficient for most freelancers.

Making Tax Digital for Income Tax

From April 2026, sole traders and landlords with gross income over £50,000 must use MTD-compatible software to keep records and make quarterly digital submissions to HMRC. Those with income over £30,000 follow from April 2027, and £20,000 from April 2028.

Under MTD for ITSA, instead of one annual Self Assessment return you will submit four quarterly updates plus a final end-of-period statement. You will still make a single annual tax payment by 31 January.

If your income is approaching these thresholds, now is the time to start using accounting software that will be MTD-compatible, so the transition is seamless.

Tips to make Self Assessment easier

• Set aside tax as you earn — pay yourself into a separate account every time a client pays you. Aim for 25–30% of each payment
• Keep records in real time — logging expenses weekly is far easier than reconstructing a year at January
• File early — you can submit your return as soon as the tax year ends in April. Filing in May rather than January means no last-minute stress, and you know your bill earlier so you can plan
• Check your tax code — if you also have PAYE income, HMRC sometimes adjusts your tax code to collect Self Assessment tax through payroll. Check this is correct each year
• Claim everything you are entitled to — many freelancers under-claim on home office and equipment. Review your expenses carefully before filing