Freelancing gives you freedom, but it also gives you a tax bill. Here's everything you need to know to stay legal and keep as much as possible.
Registering with HMRC
You must register as self-employed with HMRC by 5 October in your second tax year of trading. For example, if you started freelancing in June 2025, register by 5 October 2026. You can register online — it takes about 10 minutes.
What Tax Do Freelancers Pay?
Income tax: Same rates as employees (20%, 40%, 45%) on your profits (not revenue). Class 2 NI: £3.45/week if profits exceed £12,570. Class 4 NI: 6% on profits between £12,570 and £50,270, then 2% above. Use our self-employed calculator to see your exact bill.
Expenses: What You Can Claim
You can deduct any expense that is "wholly and exclusively" for business. Key deductions include office costs (rent, utilities — proportion used for business), equipment and software, professional development and training, travel and subsistence for business trips, marketing and advertising, accountancy fees, insurance, and phone and internet (business proportion).
Simplified expenses for working from home
HMRC allows flat-rate deductions based on hours worked at home:
25-50 hours/month: £10/month
51-100 hours/month: £18/month
101+ hours/month: £26/month
Or calculate actual costs (usually more beneficial).
Payments on Account
If your tax bill exceeds £1,000, HMRC will ask for payments on account — advance payments towards next year's tax. These are 50% of your previous year's bill, due on 31 January and 31 July. This catches many new freelancers off guard — your first year, you might face 150% of a normal year's tax in one go.
The #1 Mistake Freelancers Make
Not setting money aside for tax. From day one, put 25-30% of every invoice into a separate savings account. Don't touch it until your tax bill is paid. Many freelancers spend their first year's revenue and then can't afford the tax bill.
Calculate your freelance tax bill
Self-employed calculator →