Freelancers in the UK are self-employed and must pay Income Tax and National Insurance on their profits. If you earn over £1,000 from freelancing, register for Self Assessment and file a tax return by 31 January each year. You can reduce your tax bill by claiming legitimate business expenses.
This guide covers everything UK freelancers need to know about tax, from registration to filing.
Are Freelancers Self-Employed?
Yes. For tax purposes, freelancers are self-employed sole traders:
| Characteristic | Freelancer Status | |----------------|-------------------| | Work for multiple clients | Yes | | Invoice for work | Yes | | Set own hours/rates | Yes | | Use own equipment | Usually | | Tax status | Self-employed | | Tax return | Self Assessment |
This applies whether you're a writer, designer, developer, consultant, photographer, or any other freelance profession.
Registering for Self Assessment
If You Earn Over £1,000
Register for Self Assessment:
- Go to gov.uk/register-for-self-assessment
- Select "Self-employed or sole trader"
- Enter your business type (e.g., "Freelance graphic designer")
- Provide personal details
- Receive your UTR within 10 working days
Deadline: Register by 5 October following the tax year you started freelancing.
If You Earn Under £1,000
The £1,000 Trading Allowance covers your income:
- No tax to pay
- No registration required
But if you want to claim expenses (to create a loss or for future years), you'll still need to register.
What Income to Report
Report all freelance earnings:
| Income Type | Report? | |-------------|---------| | Client payments | Yes | | Project fees | Yes | | Retainer payments | Yes | | Royalties (from your work) | Yes | | Platform income (Fiverr, Upwork) | Yes | | Late payment interest | Yes |
Income Timing
Report income in the tax year you earned it (invoiced), not necessarily when paid:
| Basis | When to Report | |-------|----------------| | Cash basis (most freelancers) | When payment received | | Accruals basis | When work completed/invoiced |
Most freelancers under £150,000 turnover use cash basis for simplicity.
Freelancer Expenses
Claiming expenses reduces your taxable profit. Only claim costs "wholly and exclusively" for business.
Equipment
| Expense | Claimable | |---------|-----------| | Laptop/computer | Yes (capital allowance) | | Monitor, keyboard, mouse | Yes | | Desk and chair | Yes | | Printer | Yes | | Camera (if for work) | Yes | | External hard drive | Yes |
Capital allowances: Items over ~£1,000 are claimed via Annual Investment Allowance (100% in year one).
Software and Subscriptions
| Expense | Claimable | |---------|-----------| | Adobe Creative Cloud | Yes | | Microsoft 365 | Yes (business %) | | Project management tools | Yes | | Accounting software | Yes | | Stock images/fonts | Yes | | Cloud storage | Yes (business %) | | Industry-specific software | Yes |
Home Office
If you work from home:
Simplified Expenses:
| Hours/Month | Rate | |-------------|------| | 25-50 hours | £10/month | | 51-100 hours | £18/month | | 101+ hours | £26/month |
Or Actual Costs:
Calculate business proportion of:
- Rent or mortgage interest
- Council tax
- Utilities
- Insurance
Learn more: Working From Home Tax Relief
Phone and Internet
| Expense | Claimable | |---------|-----------| | Phone contract | Business % | | Broadband | Business % | | Additional phone line | 100% if business only |
Example: Phone is 60% business use, £40/month contract. Claim: £40 × 60% × 12 = £288/year
Travel
| Expense | Claimable | |---------|-----------| | Train/bus to client meetings | Yes | | Mileage to clients (45p/25p per mile) | Yes | | Flights for business | Yes | | Accommodation (business trips) | Yes | | Taxis to meetings | Yes |
NOT claimable: Travel to your regular workplace (if you have one).
Professional Development
| Expense | Claimable | |---------|-----------| | Training to update existing skills | Yes | | Industry conferences | Yes | | Professional books | Yes | | Online courses (related to work) | Yes | | Professional body membership | Yes |
Not claimable: Training for entirely new skills unrelated to your current work.
Marketing
| Expense | Claimable | |---------|-----------| | Website hosting and domain | Yes | | Business cards | Yes | | Portfolio website | Yes | | Advertising | Yes | | Networking event fees | Yes |
Professional Services
| Expense | Claimable | |---------|-----------| | Accountant fees | Yes | | Legal fees (business contracts) | Yes | | Professional indemnity insurance | Yes | | Bookkeeper | Yes |
Platform Fees
If you use freelance platforms:
| Platform | Fee Claimable? | |----------|----------------| | Fiverr fees | Yes | | Upwork fees | Yes | | PeoplePerHour fees | Yes | | Payment processing fees | Yes |
Report gross income, claim fees as expense.
Calculating Your Tax Bill
Step 1: Calculate Profit
Profit = Total Income − Allowable Expenses
Step 2: Apply Income Tax
| Band | Taxable Amount | Rate | |------|----------------|------| | Personal Allowance | £0 – £12,570 | 0% | | Basic Rate | £12,571 – £50,270 | 20% | | Higher Rate | £50,271 – £125,140 | 40% | | Additional Rate | Over £125,140 | 45% |
Step 3: Apply National Insurance
| Type | Calculation | |------|-------------| | Class 2 | £3.45/week if profits over £6,725 | | Class 4 | 6% on profits £12,570-£50,270 | | Class 4 | 2% on profits over £50,270 |
Example: Freelance Designer
Sophie: Freelance Graphic Designer
| Item | Amount | |------|--------| | Client income | £48,000 | | Software subscriptions | −£1,200 | | Equipment (laptop, monitor) | −£1,800 | | Home office (simplified) | −£312 | | Phone and internet (60%) | −£576 | | Travel to clients | −£840 | | Professional insurance | −£350 | | Accountant | −£300 | | Taxable Profit | £42,622 |
Tax Calculation:
| Tax | Calculation | Amount | |-----|-------------|--------| | Income Tax (0%) | £12,570 | £0 | | Income Tax (20%) | £30,052 × 20% | £6,010 | | Class 2 NI | £3.45 × 52 | £179 | | Class 4 NI | £30,052 × 6% | £1,803 | | Total Tax | | £7,992 |
Effective tax rate: 18.8%
Freelance vs Employed Contractor
Determining Your Status
HMRC uses various tests to determine if you're genuinely self-employed:
| Factor | Self-Employed | Employed | |--------|---------------|----------| | Control | You decide how to work | Client directs work | | Substitution | Can send someone else | Must do it yourself | | Mutuality | No ongoing obligation | Continuous relationship | | Equipment | Provide your own | Client provides | | Financial risk | Can profit or lose | Fixed wage |
IR35 (Off-Payroll Working)
If you work through a limited company, IR35 rules may apply:
- If inside IR35: taxed like an employee
- If outside IR35: normal company taxation
For sole trader freelancers, IR35 doesn't apply directly—you're already paying self-employed tax.
Invoicing Best Practices
Your invoices should include:
| Element | Example | |---------|---------| | Your name and address | Sophie Jones, 14 High Street... | | Client name and address | Acme Ltd, 20 Business Park... | | Invoice number | INV-2025-042 | | Invoice date | 15 January 2025 | | Payment due date | 15 February 2025 | | Description of work | Logo design and brand guidelines | | Amount | £1,500.00 | | Your payment details | Bank account, sort code |
Keep copies of all invoices for 6 years.
Freelancing Plus Employment
Many freelancers have a day job plus freelance work:
| Source | Treatment | |--------|-----------| | Employment | Taxed via PAYE (employer deducts) | | Freelance | Taxed via Self Assessment |
Combined effect:
Your freelance income is added to employment income:
| Income | Amount | |--------|--------| | Employment salary | £35,000 | | Freelance profit | £15,000 | | Total | £50,000 |
If total pushes you into higher rate band, freelance income may be taxed at 40%.
Payment on Account
If your tax bill exceeds £1,000 (and less than 80% was deducted at source), you make advance payments:
| Payment | When | Amount | |---------|------|--------| | First payment on account | 31 January | 50% of previous year | | Second payment on account | 31 July | 50% of previous year | | Balancing payment | 31 January (following year) | Remainder |
First year surprise: Your first bill includes the full year PLUS 50% advance payment.
VAT for Freelancers
VAT Registration
You must register for VAT if:
- Turnover exceeds £90,000 in 12 months, OR
- You expect to exceed this in the next 30 days
Voluntary Registration
You can register voluntarily below the threshold:
- Reclaim VAT on business purchases
- May appear more professional
- But adds admin and complexity
Most freelancers under £90,000 don't register.
Record Keeping
Keep for 6 years:
| Record | Purpose | |--------|---------| | Invoices issued | Proof of income | | Bank statements | Transaction evidence | | Expense receipts | Support deductions | | Contracts | Terms of work | | Mileage log | Travel claims |
Learn more: HMRC Record Keeping Requirements
Making Tax Digital
From April 2026 (income over £50,000) or April 2027 (over £30,000), Making Tax Digital applies:
- Keep digital records
- Submit quarterly updates to HMRC
- Use MTD-compatible software
If your freelance income exceeds these thresholds, prepare now.
Common Freelancer Mistakes
1. Not Setting Aside Tax
Freelance income arrives gross. Set aside 25-30% for tax throughout the year.
2. Missing Expenses
Review expense categories carefully. Many freelancers under-claim.
3. No Separate Bank Account
Mixing business and personal makes bookkeeping harder. Use a dedicated account.
4. Late Filing
The deadline is 31 January. Late filing = £100 penalty minimum.
5. Forgetting Payments on Account
Budget for the first year payment on account shock.
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Summary: Freelance Tax Checklist
- [ ] Register for Self Assessment (if earning over £1,000)
- [ ] Open a business bank account
- [ ] Track all income from clients and platforms
- [ ] Keep receipts for all business expenses
- [ ] Claim home office, equipment, software, travel
- [ ] Set aside 25-30% for tax
- [ ] File Self Assessment by 31 January
- [ ] Pay tax (and payments on account) by deadlines
- [ ] Keep records for 6 years