A Simple Guide to Self-Employed Tax

Self-employment offers a wealth of benefits to those who take the risk. Obviously, the option of starting your own business and being your own boss is one of the main draws. Another upside is financial, with the business owner being in charge of income, profit and salary. However, there is another financial aspect to self-employment which is less straightforward- tax.

When you are employed by a company or individual, the vast majority of financial responsibility falls on them. For example, tax and national insurance is calculated and automatically deducted from an employee’s salary. When you’re self-employed, the responsibility is placed on you and therefore the process becomes more complex. The way in which you make tax contributions is one of the main differences between standard employment and self-employment and it should be one of the main considerations before making the leap.


Upon deciding to become a sole-trader, the first step is to register as such with HMRC. The deadline for registration is the 5th October in your company’s second tax year. It’s worth noting that the tax system works a year behind so it’s the first October following the beginning of your self-employment. Although October is the deadline, it’s a good idea to complete registration sooner, rather than later. If you fail to meet the deadline, you may incur penalties.

Registration can be completed on the HMRC website, which has a wealth of resources to help you through the process, step by step.


Self-Assessment can be completed online or via post and involves the submission of financial information, including net income, profit, losses and expenses. HMRC can then use this information to calculate what, if any payments are due. These can include income tax, national insurance and/or VAT. The amount that is due will depend on a variety of factors, with tax increasing as income increases.

It’s important to collect evidence of your financial transactions throughout the working year. This will not only make self-assessment much more straightforward; it also offers peace of mind should HMRC request any evidence. Evidence includes any documentation pertaining to income or expenses, including receipts, invoices and contracts.


The deadline for completing your self-assessment is different according to the method you choose. If you opt to complete self-assessment via post then this must be done before the 31st   October. Alternatively, if you choose the online option, your deadline is 3 months later on the following 31st January. The deadline for paying any tax that you owe is also the 31st of January. However, if you make advance payments towards your bill, also known as “payments on account”, then you have a second payment deadline of 31st July.


The decision to become self-employed can be daunting. Not only do you have to take on the risk of starting your own business, but you also have to grapple with the responsibility of self-assessment and taxes. It can be easy for financial responsibilities to build up and become overwhelming. If you have any questions or worries about self-assessment or paying your tax bill, it’s recommended that you get in touch with HMRC directly and they will be able to help.

It’s also worth considering outsourcing the self-assessment obligation to a trained accountant. The majority of accountants are well versed in the tax system, including the more complex aspects of self-assessment and are therefore ideal candidates to help. Importantly, accountants can offer peace of mind that your accounts are in good hands, freeing up valuable time and headspace.

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