Self-employment in the UK

This information is not intended as legal, tax, accounting or other professional advice. You should consult a professional advisor when making tax or accounting decisions.

Self-employment overview

Ways to do business in the UKPrivate entrepreneur (Sole trader / Self-employment).
This is the simplest business structure. You will run your own business as an individual and make profit after taxes. However, your personal and business assets are not considered separate. This means that you are personally liable for business-related debts.
In this guide, we will talk in more detail about this particular form of doing business in the UK. Sole trader is synonymous with self-employed.
There are other types of business (partnership, private limited company (Ltd), etc.) 

Self-employmentWe recommend that you familiarize yourself with the websites and information on Self-Employment, which is described in detail on gov.uk
Informational assistance from the state if you are self-employedWe recommend checking out the following sites:● HMRC Education Platform (Tax)● Government-backed advisory services across the UK help you with everything from creating a business plan and market research to fundraising and hiring staff● England● Wales● Scotland● Northern Ireland
Self-employed vs employedA person is self-employed if he works for himself as a business owner or freelancer. They manage the business themselves and are responsible for its success or failure.
If you are self-employed, you are not working for a particular employer who pays a fixed salary or salary like an employee does. You also do not have the same labor rights and obligations as employees.
However, you can be both an employee and self-employed at the same time. You can, for example, work for an employer during the day and run your own business during the evenings and weekends.

Very important! For certain types of employment, it is difficult to understand for yourself whether your type of employment is self-employed or an employee. There is a questionnaire to help with this. If the questionnaire answers that you are an employee and not self-employed, it is very important that your employer takes this into account and correctly creates processes for repaying you.

Registration Self-Employed

Unlike Ukraine, you can start your career whenever you want and register for tax filing later. 
Registration deadlines:You are eligible to register as Self-Employed until October 5th of the tax year in which you became self-employed
For example, you started working as a self-employed hairdresser in May 2022. You must register by October 5, 2023. 

How to register (register for self-assessment) The process is completely freeYou can ONLY register online if you have 2 of the following documents: UK passport, driving license, credit reference.
One reason you might want to consider exchanging your driver's license earlier than the 12 months allowed period is to access Government Getaway and access your tax account. 
Since the vast majority of Ukrainians currently do not have the opportunity to verify their identity on the government portal Government Getaway, the following registration methods are available to Ukrainians: 
Sending by mailYou must open this site from a computer, fill it out on a computer, print it out and mail it to the address indicated on the application form. The UTR number will be mailed to you within 10 business days.
Direct link to form:
Registration by phoneYou can call HMRC and check in by calling0300 200 3310

Activity licenses 

Licenses are not required for many businesses, but there are a number of business activities where they are needed. You will almost certainly need a license if you want to be a childminder, tattoo artist, open a pet shop, etc.
Some activities where a compulsory license/registration with regulators is required - the list is not exhaustive, only as examples● Sale of Alcohol - You will need a permit from your local licensing authority, including a personal license and a premises license● Food related business - if you want to start a similar business, you can explore this portal - it is important to know that many councils have additional requirements, so it is important to study additional requirements for your area: ● Playing recorded music in public (eg in a store or at an event) - contact UK music licensing company PPL PRS.● Trading in public places -● Business of training truck drivers or driving instructors - The DVLA will issue licenses to allow your drivers to legally drive certain vehicles.● Processing personal data of customers - apply to the Office of Information Commissioners for a license. You can check here if your activity requires registration● Certain financial activities such as lending money, investment or financial advice require a license from the Financial Conduct Authority (FCA) Convenient service to check if you need a license: - Use this and other online sources

Insurance when you are self-employed

For some likely jobs as self-employed, you should have appropriate insurance. More about insurance here:
The most important types of insurance you should consider, depending on the type of business (please see the full list at the link above):
Public liability insurance (Public liability insurance)This is paid out in the event of an error in any of your business transactions that causes injury or damage to the customer or any person.
For example, you should be insured if a person trips and is injured due to a liquid spill in an unmarked workshop.
You will most likely need this if people will be visiting your premises, for example if you run a store.
Clients may want to see proof of proper insurance before they do business with you.

Product liability insuranceIf the goods you made, sold, or repaired hurt or killed someone, or damaged someone's property, you may have to pay compensation.
You may be held liable for damage or injury caused by defects in the design or manufacture of your product, even if you were not negligent.
If your business is in a particularly high-risk sector, such as food and beverage, toys, or electrical engineering, you really need to consider this.
Product liability insurance is often included in liability insurance.

Other types of insurance that should be considered depending on your activity - ​professional liability insurance, employer liability, and others

Taxes when you are self-employed

More information here here
If you are self-employed, you are entitled to the same tax-free minimum as an employee. This is the amount you can earn before you start paying income tax.
For the 2022-2023 tax year, the non-taxable minimum is £12,750.
If you earn more than £100,000 the exemption is reduced by £1 for every £2 of income you earn above the £100,000 limit.

Income tax rate2022–23Personal allowance: 0% - £0 up to £12,570 you pay no income tax
Base rate: 20% - £12,571 up to £50,270 you pay at 20% income tax rate
Higher rate: 40% - £50,001-£150,000 you will pay 40% income tax
Additional rate: 45% - Over £150,000 you will pay 45% income tax

Taxes if you are both employed and self-employed. However, if you have two jobs and one is self-employed, things are a bit more complicated.
You only get one non-taxable minimum per person as a person, not per job, which usually applies to what HMRC considers to be your main job that earns you the most money.

Paying National insurance contributions when you are self-employedIf you are self-employed, you usually pay 2 types of national insurance:
Class 2 if your income is £6,725 or more per year.
Class 4 if your income is £11.909 per year or more.

How much will you pay:Class 2
3.15 pounds per week
Class 4
10.25% on profits from £11,909 to £50,270
3.25% on profits over £50,270

More here
How to pay taxes and national insurance if you are self-employed
More here

When do you need to fill out a Self-Assessment Tax return?
The tax year in Britain runs from 6 April to 5 April.If your self-employment income did not exceed £1,000 (before deducting anything you could claim for tax credits), you may not file a tax return, but you must inform HMRC.
Let's say you started on May 5, 2022 as self-employed. Below are the main dates. All dates below are the last dates you can take action. You can file your tax return at the end of the tax year. 
Registration - until October 5, 2023Tax return in paper form - until October 31, 2023Online tax return (may be difficult for Ukrainians) - until January 31, 2024Payment of taxes - until January 31, 2024Thus, you must pay income tax for the tax year from April 2022 to April 2023 as early as January 31, 2024. 
IMPORTANT! You must always have an amount to pay taxes and National Insurance Contributions. To do this, it is better to set aside an amount for paying taxes every month. 
IMPORTANT! You are responsible for knowing all tax laws and obligations so study everything in detail, if in doubt always consult an accountant
What information do I need to complete the Self-Assessment?If you've never filed a Self-Assessment tax return before, this may seem intimidating. But once you understand the process, it's relatively easy - as long as you have all the information you need.You can also hire an outside accountant to complete the declaration for you. It is always recommended to consult an accountant if you are not sure about something.
Before you start, make sure you have:- your ten-digit unique taxpayer identification number (UTR)- your national insurance number- details of your tax-free income for the tax year, including self-employment income, dividends, and share interest- accounting for any costs associated with self-employment- any contributions to charity or pensions that may be eligible for tax creditsP60 or other records showing how much income you have earned that you have already paid tax on.
How to complete the Self-Assessment sections:Sole Proprietor (SA103)
How to calculate your expenses correctly When running a business, it is very important to understand what expenses you can tax return at the end of the tax year and what not.
Full details here
If you are self-employed, your business will have various running costs. You may deduct some of these expenses to calculate taxable income if they are eligible expenses.
It is important that you understand each of the possible eligible expenses, how you can record them, if not the entire amount is spent on business expenses.
The most common questions arise on: utility costs if you work from home, transport costs if you use a travel card, and so on.
You can find all the necessary information at the link, including information on detailed examples of expenses. 

Your final tax Your final tax will depend on the amount of turnover and the cost of doing business.
The turnover of your business - the cost of doing business = your income.

If you cannot pay your taxes by the specified deadlineIf you cannot afford to pay your tax bill, you should contact HMRC as soon as possible by calling the Business Payments Helpline on 0300 200 3825. This line is for everyone, not just businesses.
If you don't pay on time, you'll likely have to pay interest and penalties.
You may be offered more time to pay or be offered the option of paying in installments - it is important to contact the tax office as soon as possible and contact your accountant.

How to End Your Self-Employed Activity

The process is simple, you should notify HMRC

Universal Credit & Self-employment
If you receive Universal Credit and started working as a self-employed, you must notify Universal Credit of the beginning of employment through the journal (Report Change of Circumstances).
You will be asked about the date you started working. It is best to notify Universal Credit as soon as you start making profits from your Self Employment business, as this will affect your Universal Credit payouts.
When you announce that you are starting work, Universal Credit will send you an invitation to a self-employment meeting where they will decide if self-employment is your main job. This is known as "income self-employment". (gainfully self-employment).
You need to show that:• self-employment is your main job or main source of income• you get a permanent job from self-employment• your work is organized - this may be evidenced by the presence of invoices, receipts or invoices• you are in business for profit
If the officer decides that this is the case, UC will consider you "gainfully self-employment". It means that:• you will be required to report to us monthly on income and expenses related to self-employment• you don't have to look for another job to get Universal Credit
If the officer decides that you are non-gainfully self-employed, you must:• report to us monthly about your self-employment income and expenses• seek and be available for other work to continue receiving universal credit
What can you bring to a self-employment meeting?You need to bring proof with you showing:• your business name and address• Your Unique Taxpayer Number (UTR) - This is issued by the UK Revenue and Customs (HMRC) when you register for Self Assessement.• the date you started trading as a sole trader• the time you spend each week doing independent work• your income from self-employment• any marketing activities you run• anything else you are currently doing to increase your income• your VAT registration number, if you are registered as a VAT payer
The types of evidence you can bring include:• lists of clients and suppliers• invoices, receipts and contracts• record of transactions or cash book• trading accounts• letters from HMRC• bank statements• pay slips (if you work for someone else and are also self-employed)
• marketing materials such as business cards and flyers
• your business/company website address (if you have one)• portfolio with your work (for example, if you are a photographer)• diary of business meetings or planned work• cash flow statement, including actual or forecast values• your business plan• business certifications such as insurance or professional accreditation certificatesBring as many of these documents as you can. You may also provide any other evidence to support your claim.

Frequently asked Questions:

Why is it important to know if I am employed or self-employed?Whether you are employed or self-employed, the amount of tax and NIC you have to pay and how you pay them will matter.
If you are employed, your employer is required by law to collect pay-as-you-go tax (PAYE) and class 1 national insurance contributions on your wages and pay them to HMRC on your behalf. If you are self-employed, you pay income tax through the Self-Assessment tax return system, as well as class 2 and 4 national insurance contributions directly to HMRC.

⚠️ Important Note: The distinction between employment and self-employment is not always clear; some businesses try to exploit job seekers by treating them as self-employed when they should be treated like employees. This is known as "false self-employment".
This means that the business avoids the use of Pay As You Earn (PAYE) and thus does not make any tax or national insurance payments on your HMRC wages. Under certain circumstances, HMRC may require you to pay the PAYE that should have been made by the business if they believe you should have been treated as an employee rather than as an employee, although they must contact the business first.
So be careful if:● you are offered a job and given a choice: be an employee or be self-employed;● Someone you are going to work for tells you that you are self-employed.● Instead, make sure you understand your employment or self-employment status before starting work. If you think something is wrong, you can contact HMRC.● You plan to hire employees 
⚠️ Very important! Sometimes it is difficult to understand for yourself whether your type of employment is suitable for self-employed or an employee. There is a questionnaire to help with this. If the questionnaire answers that you are an employee and not self-employed, it is very important that your employer takes this into account.
Can I be an employee and self-employed at the same time?Yes.You can be an employee and self-employed at the same time. This usually happens if you are doing two jobs. For example, if you are a self-employed hairdresser during the day and a hotel porter in the evenings, you will be both self-employed and an employee.
If you believe you are both employed and self-employed, you may need to review the other pages in the self-employment section, as well as the pages in the employment section, to find out about your tax position.
You pay tax on your employment income through PAYE, and you pay self-employment income tax through the self-assessment system.
You should note that if you are required to file a Self-Employment tax return because of your self-employment income, you must also report your employment income (and taxes paid) and any other income you have on the Self-Assessment tax return, and not just self-employment income, as it is a "refund" of all your taxable income for the year.
In what cases do you need a cash register (or equivalent) to sell goods / servicesIf your business handles cash at the point of sale, there are requirements for a cash register and registering cash receipts, however cash is becoming less common in the UK and digital point of sale is more popular
There are many options for point-of-sale systems (which are not physical cash registers) that connect directly to your accounts) - SUMUP, SQUARE UP, ZETTLE. 
Do I need a cash register for online trading?A physical checkout is not required for ecommerce, but good ecommerce software will have bookkeeping and payment processing built in (see Stripe if your site is made on Shopify or Squarespace).
Can You Hire Employees If You Are Self Employed?There are no restrictions, but you need to study the relevant section on the website
Do self-employed need to open a separate bank accountIt is recommended that you open a corporate bank account with any bank that offers services for Self-Employed and you can deposit cash into these accounts if you are trading in cash - there are no business limits on how much cash you can deposit (i.e. you may be a cash oriented business and only trade cash), but check with your bank if there are any day/deposit limits.
You can also receive income on your personal card, but this can be inconvenient in terms of bookkeeping for your business and separating your personal and business expenses. 

Can I withdraw funds from a business account for personal expenses?While as a sole trader, any funds you generate can be used immediately for personal use, you must ensure that you have the funds to pay taxes and therefore you will need to ensure that you deduct some gross income for this purpose. .
Thus: if you generate more income than you need to pay the subsequent tax, you can use these funds for your own needs.

Can I do my own bookkeeping or do I need to contact a separate accountant?There is no need to hire a bookkeeper or do bookkeeping with some specialized company, you can keep your own records as long as they are accurate, up-to-date and correct - the process of submitting a Self-Assessment to HMRC for the self-employed is quite simple - keeping records up to date and accurate with a lot of details are needed if you want to do this, however we recommend looking into small business accounting software solutions such as Quickbooks, which will greatly simplify this process and link your business to your bank accounts and can handle receipts, invoices, etc. - however, it may not be easy to scale as you become a larger business.
It is always recommended to consult an accountant if you are not sure about any issues.

Does VAT apply to self-employment?Yes. Self-employed individuals, including freelancers, are subject to the same rules as any business when it comes to VAT registration. If you meet certain criteria, you need to register and start collecting VAT. The current VAT turnover threshold is £85,000 per annum

This information is not intended as legal, tax, accounting or other professional advice. You should consult a professional advisor when making tax or accounting decisions.