Tax Tips for UK Freelancers


by James Hendicott

Working for yourself is great, isn’t it? You get an open schedule, a nice mixed bag of employers and plenty of creative freedom. Wait, nobody told you about the paperwork? Well, if you’re a casual freelancer with a small income, you might not have to worry too much (see how to pay, and how to calculate payments). If this is the start of something big, though, you’d better get on with registration… here’s a quick lowdown on freelance tax issues to get you started:

How to register with HMRC: So you’ve just received that first fulfilling payment as a freelancer? Well, you probably don’t want to deal with every tiny intricacy of the self-employed tax system right from the start, but there are a few things you simply have to do. First of all, you need to register immediately, as the UK tax authority can be pretty strict on punishing those who don’t. You can do that here, and find the information you’ll need on HMRC’s helpful PDF, here. You’re almost certainly a ‘solo trader’, unless you are part of some kind of writing partnership. If you want to keep hold of your national pension (and other – including to some extent NHS health) benefits, you’ll need to look into National Insurance Contributions, too. The simplest way to do this is by direct debit, which you can set up through this form – the fixed amount is currently £2.40 per week, so it’s certainly not something to be too concerned about. Remember to keep a thorough record of your business-related income and expenditure (with receipts, where possible, even if they’re just PayPal ones), too, as this is vital in calculating your final payments, and will save eons of time should the dreaded audit come along later.

How to pay, and how to calculate payments: The best way of completing your annual tax return is probably online, as it allows you to complete it over time, and gives an additional three months to do so on top of the paper application deadline (online deadlines are the 31st of January). It also calculates your taxes automatically, and will provide you with complete details on how to pay them. You can find a step-by-step guide here. If your total earnings are less than £5075 (this figure changes year on year), you may be exempt from certain charges altogether, though you’ll still need to register here. You don’t have to worry about registering for VAT unless your turnover exceeds a certain amount for the year (currently £68,000). Further information on all these steps can also be found in PDF form here.

Account keeping and Tax Breaks: Aside from just noting down your income, there’s another side to account keeping for freelance writers. You’re entitled to claim a range of business related expenses against your income, which can include anything from the computer you use to business cards, and even the utility bills for any part of your house that you use for your business, though you’ll need to keep receipts for all of these claims (so claiming on an old computer’s unlikely to make the cut). All of these factors can be added easily to your online tax return, though you should be careful about exactly what you claim, as you could end up with a penalty. A detailed explanation on what can be claimed (and what can’t) can be found here. When it comes to tax breaks, you might benefit from being part of a cohabiting couple, having children or having been out of work for sometime before embarking on your freelance quest. The benefits can be substantial, so that’s always worth checking out, too.

Employing Someone Else: Wow, you are doing well, aren’t you! In truth, most of the time you’re better off sub-contracting work to other writers should it come to that, and letting them deal with their own tax issues. If you do need to become an employer, though, you’ll need to register for PAYE (employee Pay As You Earn), as well as contributing to your employees National Insurance Contributions. As most of us will be in dreamland should we ever reach this level of success, we’ll leave you lucky people to find out more for yourselves, here.

Most of us fall well within the simpler parts of the UK tax system, but should you need to look at things in an altogether more complex way, there are regular open days, and advice is available by phone, too. Fortunately, the government wants you to get your tax right almost as much as you want to avoid being audited, so there’s usually a way to sort out more complex issues. A good place to start is in calling business link on 0845 600 9006 (in England – slightly differing regulations in Wales, Scotland and Northern Ireland mean they have their own numbers, which can be found on page 29 of this PDF). Tax can be a complex world, but being able to hold your head high and say you run your own business is a worthy reward, right? Best of luck.


One response
  1. John Lister Avatar

    A couple of points to add:

    * If your turnover is less than £15,000 a year, you only have to submit an overall figure for income/expenses/profits, rather than full accounts. Of course, you should still be keeping full accounts for your own purposes anyway.

    * has a handy tool for figuring out how much tax you should be paying. I use the monthly field each month to get a rough idea of how much I need to be setting aside for taxes.

    * Unlike the US, Britain is very generous in terms of the payment schedule for self-employment taxes: there’s an eight month gap between the end of the financial year and the relevant taxes being due, meaning that if you do a job in April, the tax on it isn’t due for twenty months. If you are doing OK financially and are well organised, the smart thing to do is to figure out the taxes due for each month’s earnings and put them aside in a dedicated savings account. You should then have enough cash in the account to pay the tax bill when it comes due and then pocket the interest.

    * As far as I know, National Insurance contributions don’t affect NHS coverage as that is open to everyone. However, the fixed-rate Class 2 contributions are well worth paying because, as you said, they affect pensions as well as some benefits. Note also that while class 2 is voluntary, a self-employed person must pay class 4 contributions which are based on income and are part of the annual salary.

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