Pay Tax on Freelance Work UK

Tax Information For Freelancers: How to Pay Tax on Freelance Work UK?

A government study found that a wide range of individuals works for themselves within the UK. If you’re one of them, you’ll be obligated to pay tax on freelance work UK and need to register yourself for Self Assessment. After registering, you are required to pay several types of taxes such as income tax, NICs and VAT, if you are a freelancer or a sole trader.


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Types of Freelancers

Within the UK, freelancers can be of the following types:

  • Owner of a limited company
  •  Self-employee person / Sole Trader


Tax on Freelance Work UK? – UK Taxation System

HM Revenue and Customs (HMRC) collects and allot charges and payments for self-employed persons and limited company owners. Although freelancing is a well-known way of working, the phrase isn’t recognised by the HM Revenue & Customs. It provides a useful guide in determining your self-employment status and finding out many ways to work for yourself whether you’re categorised as a single trader, a partner in a business, or own a limited company.


Types of Taxes as a Freelancer

As a freelancer, you need to pay the following taxes:

Income Tax – Income tax is paid on all the trading profits you earned as a freelance. This tax is paid at the same time as paying taxes on your total income. HMRC fixes the rates of these taxes.

NICs – The Insurance you need to contribute as a freelancer is the National Insurance Contributions (NICs), which includes the State Pension and National Credit (for specific benefits depending on your contributions).

VAT – stands for Value Added Tax; it is a tax that you need to pay when you purchase products and services with the standard rate (20%), reduced rate (5%), and zero-rate (0%).


Types of Taxes as a Freelancer


How to Pay Tax on Freelance Work UK?

The tax as a freelancer and a sole trader depends on your profits and incurred allowable expenses. You’ll be able to effectively calculate your earnings by deducting your costs(expenses) from your total salary. In case you are a new freelancer, then you have to do the following things:

  • Register yourself for Self-Assessment on HM Revenue & Customs website
  • Register yourself for Value Added Tax (VAT)

You can see the rates of taxes to pay as a freelancer within the Uk here!


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Allowable Expenses for Freelancers

HMRC has strict rules about what you can expense and what you can not. Those expenses are allowable incurred for business purposes such as staff salaries, traveling, insurance, marketing and websites, training courses, vehicles(cars, vans), office supplies/bills, equipment, machinery, etc. You can claim tax reliefs on these allowable expenses.


Final Thoughts

To summarise the discussion, paying tax on freelance work UK can be simple if proper budgeting is done. You can not escape from paying taxes, but you can get tax reliefs for the expenses incurred for business purposes. You can also plan some tax-saving strategies to reduce the burden of your taxes. 


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Disclaimer: This blog contains general information about tax for freelancers.

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