In the UK, engaging in self-employment is an exciting venture, but it also comes with significant tax obligations.

Understanding these obligations and ensuring compliance is crucial to the healthy operation of your business.

To avoid receiving further fines in the future, it is essential to proactively understand the obligations that self-employed individuals need to fulfill.

Self-Assessment Tax Return

If you live and work in the UK and earn an income, you are required to pay taxes on it.

Unlike regular employees, you need to declare it through the submission of a Self-Assessment (SA) tax return.

Typically, self-employed individuals need to submit a tax return when their income exceeds £1,000.

Therefore, it is advisable to apply for and inform HMRC well in advance before you commence your business to avoid future complications.


Income Tax for Self-Employed

Before you submit your tax return, you need to understand how income tax works for self-employed individuals.

Firstly, you should retain all transaction receipts and bank statements to help you calculate your taxable profits.

Once you have calculated your taxable profits, you will need to pay income tax at the current non-savings tax rates.

For specific tax rates, please refer to HMRC.

National Insurance (NI)

As a self-employed individual, you also need to consider your National Insurance contributions.

Typically, you will need to choose between Class 2 and Class 4 NICs based on your circumstances.

Class 2 NICs are usually paid through self-assessment when your profits exceed the small profits threshold (£6,725).

Class 4 NICs depend on your earnings, relative to the profit thresholds and limits.



Seeking Professional Assistance

As a self-employed individual, you may spend a significant amount of time researching and calculating taxable profits.

Any issues or missed submission deadlines can trigger HMRC’s penalty system.

To avoid additional penalties and save more time, you can entrust your finances to our professional team.

We are one of Manchester’s top 10 accounting firms and a VAT partner with Amazon.

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