Taxes for Freelancers: What You Need to Know

So you’ve started earning money from freelance work – congratulations!

Whether you’re designing logos from your kitchen table, writing articles in your spare time, or offering consulting services, you’ve joined the millions of people making money on their own terms.

But here’s the thing nobody warns you about when you start freelancing – you’re now responsible for your own taxes. No more having everything sorted automatically by your employer. It’s all on you now.

Don’t panic. While it might seem daunting at first, understanding freelance taxes isn’t as complicated as you might think. Let’s break it all down.

What Is a Freelancer?

First things first – what exactly makes you a freelancer? Simply put, if you’re working for yourself and getting paid by different clients for specific projects or services, you’re freelancing. This could be anything from:

• Graphic design or web development
• Photography or videography
• Consulting or coaching
• Online tutoring or teaching
• Selling crafts or products online
• Writing blog posts or copywriting
• Social media management

The key difference between freelancing and regular employment is that you’re not on anyone’s payroll. You send invoices, chase payments, and work with multiple clients rather than having one boss.

In tax terms, freelancers are “self-employed” or “sole traders.” These terms all mean the same thing – you work for yourself and are responsible for sorting out your own taxes.

The Numbers That Matter

Here’s some context about freelancing in the UK that might surprise you. As of October 2024, the UK had approximately 4.38 million self-employed workers, and freelancers contributed over £270 billion to the economy in 2024. You’re part of a massive and growing workforce.

Almost 1 in 20 people in the UK (aged 16 and over) freelance full time for a living, while many more do it as a side hustle alongside their main job. The point is, you’re definitely not alone in figuring this out.

When Do You Need to Tell HMRC You’re Freelancing?

This is probably the most important question, and the answer is simpler than you might expect.

If you become self-employed and expect to earn more than £1,000, you need to register for Self Assessment with HMRC. That’s it – £1,000 is your magic number.

Notice we said “expect to earn.” This means you should register as soon as you think you might hit that threshold, not wait until you’ve already earned it.

The deadline for registration is 5 October the following tax year. So if you started freelancing in June 2025, you’d need to register by 5 October 2026. You might have to pay a penalty if you register late, so don’t put this off.

What Taxes Will You Actually Pay?

As a freelancer, you’ll be dealing with two main types of tax:

Income Tax

This is tax on your profits – not your total earnings. Your profit is what’s left after you subtract your business expenses from your income.

The good news is that the first £12,570 of your income is tax-free (as of 2025 and the foreseeable). This is called your personal allowance.

After that, you’ll pay:

• 20% on profits between £12,571 and £50,270
• 40% on profits between £50,271 and £150,000
• 45% on anything above £150,000

Most new freelancers will only need to worry about that first 20% band.

National Insurance

Think of this as a contribution toward your state pension and benefits. The good news is that Class 2 National Insurance (the weekly flat rate) was abolished from April 2024, so you no longer have to pay this.

You’ll pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270, then 2% above that.

If your profits are above £6,725, you’ll automatically get National Insurance credits to protect your state pension entitlement, even though you’re not paying Class 2 contributions.

VAT 

If a freelancer’s turnover exceeds £90,000 in a 12-month period, they must register for VAT. Unless you’re planning to make serious money quickly, this probably won’t affect you in your first year or two.

How Much Tax Will You Pay? Real-Life Examples

Here are some clear examples showing exactly how much tax and National Insurance you’d pay – and how much you’d keep – at different profit levels in the 2025/26 tax year.

You’ll notice there’s no Class 2 National Insurance anymore. That’s because from April 2024, the government removed the old weekly Class 2 payments for most self-employed people. 

You still build up your State Pension record automatically if you earn over the threshold, but you don’t have to pay that separate charge.

If your profits are below £6,725 you can choose to pay Class 2 voluntarily (£3.50 a week in 2025/26) to keep your NI record complete for the State Pension.

Instead, you’ll just pay Class 4 National Insurance, which is a percentage of your profits on top of Income Tax.

Here’s exactly what that looks like:

Rounded to the nearest pound; assumes no other income, no student loans or pension contributions, and that you live outside Scotland.

A Note About These Percentages

You might notice the effective tax rates here look lower than what you’d see on a regular payslip! That doesn’t mean freelancing is automatically much cheaper tax-wise. The main reason the percentages seem lower is that the numbers are based on your profits after business expenses, not your total turnover. 

Moreover, Class 4 National Insurance was cut to 6%, which is slightly lower than the National Insurance most employees pay (currently 8%).

The Deadlines You Cannot Miss

Here’s where freelancers often trip up. There are specific dates you need to know, and missing them costs money:

Registration: 5 October

If you started freelancing during the previous tax year, you must register by 5 October.

Filing Your Tax Return: 31 January

You need to submit your tax return online by 31 January following the end of the tax year. The tax year runs from 6 April to 5 April, so you’ve got nearly 10 months to get your act together.

Paying Your Tax: Also 31 January

Your tax bill is due on the same day as your filing deadline. HMRC charges £100 immediately for late filing, with additional penalties accruing after 3, 6, and 12 months.

A Word About “Payments on Account”

Once you’ve been freelancing for a year and owe more than £1,000 in tax, HMRC assumes you’ll earn similar amounts the following year. So they ask you to pay half of your previous year’s tax bill in advance.

A freelancer’s tax bill is generally paid in two instalments by 31st January and 31st July each year. These are known as ‘payments on account‘. It’s just HMRC’s way of spreading your tax payments across the year rather than hitting you with one big bill.

Here’s how it works in practice:

Let’s say in your first year of freelancing, you owed £4,000 in total tax and National Insurance.

In your second year, HMRC will ask you to make payments on account based on that first year’s bill:

• 31st January 2026: Pay £2,000 (half of £4,000) + any balance owed for the previous year + file your tax return
• 31st July 2026: Pay another £2,000

This does catch people off guard, as you’re always a payment ahead. So, you will need to cover the extra tax and budget for this in July. 

Remember that you’re not paying more than you need to – when you expect to pay less tax or none at all, you will tell HMRC when you do your self-assessment and either reduce or cancel your payment on account. 

Common Mistakes (And How to Avoid Them)

Learning from other people’s mistakes is much cheaper than making your own:

Not Keeping Records

Start keeping track of everything from day one. Every invoice you send, every business expense, every receipt. HMRC requires that you maintain detailed records of all income and expenses related to your freelance work. These records must be kept for at least five years.

Mixing Personal and Business Money

Open a separate bank account for your freelance income. It makes everything much easier when tax time comes around.

Not Setting Money Aside for Tax

This is the big one. Many freelancers forget to put aside enough for their tax bill, especially if they’ve had a successful year. It’s a good rule of thumb to set aside at least 25-30% of your earnings for taxes.

Forgetting About the Trading Allowance

Here’s something most people don’t know about: if you’re self-employed, you can get up to £1,000 each tax year as a tax-free allowance: this is called the Trading Allowance. If your business expenses are less than £1,000, you might be better off just claiming this trading allowance instead of tracking individual expenses.

Leaving Everything Until January

Many freelancers wait until January to even think about their tax return, leading to rushed submissions, missed deductions, and higher stress levels. Don’t be that person.

What Can You Claim as Business Expenses?

This is where you can actually save money. Anything you spend “wholly and exclusively” for your business can usually be deducted from your income before tax is calculated.

Common things freelancers can claim include:

• Computer equipment and software
• Office supplies
• Professional training courses
• Travel costs for business (not your commute to a regular workplace)
• Part of your home bills if you work from home
• Phone and internet bills (the business portion)
• Professional subscriptions

Keep receipts for everything and be honest about what’s actually for business use.

Working From Home

Many freelancers work from home, and you can claim for this. As a self-employed person, you have two options:

Simplified expenses: This is based on how many hours you work from home each month:

• 25-50 hours per month: £10 per month (£120 per year)
• 51-100 hours per month: £18 per month (£216 per year)
• 101+ hours per month: £26 per month (£312 per year)

Actual expenses: Work out the percentage of your home used for business and claim that proportion of your household bills. This can include items such as heating, electricity, council tax, and even mortgage interest.

Most people find the simplified expenses route much easier, as it doesn’t require keeping detailed records or calculating complicated percentages.

The key thing is to be realistic about your hours. If you’re genuinely working from home for more than 101 hours a month (that’s about 25 hours a week), you can claim the full £26 monthly rate. However, keep a simple record of your working hours in case HMRC requests it.

What’s Coming: Making Tax Digital

There’s an important change on the horizon that all freelancers need to be aware of. HMRC is rolling out something called Making Tax Digital for Income Tax (MTD for ITSA).

When this affects you:

• Income over £50,000: From April 2026
• Income over £30,000: From April 2027
• Income over £20,000: From April 2028

What this actually means: Instead of filing one big Self Assessment return every January, you’ll need to:

• Keep digital records using accounting software
• Submit quarterly updates of your income and expenses to HMRC
• Submit a final declaration each year

Why this might actually be good news: If you’re already using accounting software to track your finances, you’re probably ready for this change. Many freelancers find that spreading the work across the year (rather than doing everything in January) actually makes tax time much less stressful.

If you’re not affected yet: If your income is below these thresholds, you’ll continue using the current Self Assessment system. But it’s worth keeping an eye on these changes as your business grows.

Learn more about MTD for ITSA in our article here.

When Should You Get Professional Help?

You might be wondering whether you need an accountant. For many new freelancers, the answer is probably not immediately – especially if your income is relatively modest and straightforward.

However, consider getting professional help if:

• You’re earning over £50,000 and moving into higher tax bands
• You have multiple income streams
• You’re thinking about setting up a limited company
• You’ve received any letters from HMRC
• You just want the peace of mind that everything’s done correctly

A tax accountant significantly reduces these risks by ensuring that: Your tax return is completed correctly and submitted on time. Your records are accurate and in line with HMRC’s requirements.

How Double Point Can Help

At Double Point, we understand that many freelancers just want to focus on their work, not wrestle with tax returns. Our team of chartered accountants specialises in making tax simple for self-employed professionals.

Whether you’re just starting out and want to make sure you get everything right from the beginning, or you’ve been freelancing for a while and want to hand over the tax headaches to someone else, we’re here to help.

We’ll handle your Self Assessment, make sure you’re claiming everything you’re entitled to, and give you clear advice about managing your tax affairs throughout the year. No jargon, no complications – just straightforward help that lets you get on with what you do best!

Book a consultation with Double Point today and discover how we can take the stress out of freelance taxes.