Are Freelancers Required to Pay Taxes in the UK?
- MAZ
- Jan 24, 2024
- 18 min read
Updated: Aug 27
Understanding If Freelancers Must Pay Tax in the UK (2025/26)
So, Do Freelancers Pay Tax in the UK?
The short answer is yes. If you’re freelancing in the UK – whether as a designer in Brighton, a copywriter in Manchester, or a consultant in Glasgow – you’ll usually need to pay Income Tax and National Insurance contributions (NICs) once your income crosses certain thresholds. HMRC expects freelancers to file a Self Assessment tax return unless they fall under a very new exemption for some smaller “side-hustles” (Gov.uk news release).
But let’s not stop at the headline. Tax is where the devil hides in the detail. So, let’s walk through what you actually need to know – step by step – and I’ll weave in real client stories so you can see how this plays out in practice.
Freelancers and Income Tax – Where the Thresholds Sit
Here’s how the 2025/26 Income Tax bands look in England, Wales and Northern Ireland (Scotland uses different rates, which I’ll explain shortly):
Band | Tax Rate | Taxable Income Range (2025/26) |
Personal Allowance | 0% | Up to £12,570 (reduced if income > £100,000) |
Basic Rate | 20% | £12,571 – £50,270 |
Higher Rate | 40% | £50,271 – £125,140 |
Additional Rate | 45% | Over £125,140 |
(Source: Income Tax rates and bands)
Now, here’s where it gets interesting. These thresholds have been frozen until April 2028, which means with wages and freelance rates creeping up, more of my clients are being dragged into higher bands without actually feeling richer. This is what we call “fiscal drag”. I had one client – a freelance software developer in Bristol – who was shocked to find himself in the 40% band after a contract rate increase, even though his take-home didn’t feel much higher because of rising costs.
What About Scotland and Wales?
If you’re freelancing in Scotland, your bands are different, with extra slices:
● Starter rate: 19% up to £14,876
● Basic: 20% up to £26,561
● Intermediate: 21% up to £43,662
● Higher: 42% up to £75,000
● Advanced: 45% up to £125,140
● Top rate: 48% over £125,140
(Full details on Scottish Income Tax rates)
In Wales, rates match England/Northern Ireland, though the devolved government has powers to change them (Welsh Income Tax).
This is something many freelancers miss: if you move from Manchester to Edinburgh, you might suddenly see your tax liability jump just because of where you live, not how much you earn.
Do Freelancers Also Pay National Insurance?
Yes – and this catches many people out. Freelancers don’t have their NICs automatically deducted like employees under PAYE. Instead, they pay:
● Class 2 NICs: flat weekly rate if profits exceed £6,845 (the Small Profits Threshold).
● Class 4 NICs: percentage of profits – 6% between £12,570 and £50,270, and 2% above that.
Official guidance here: National Insurance if you’re self-employed.
I once worked with “Sarah”, a freelance illustrator from Manchester, who hadn’t set aside money for NICs, thinking her tax bill only meant income tax. By January, she owed nearly £1,800 more than she expected. Painful – but avoidable with planning.
What If You Only Freelance a Little on the Side?
Here’s where the new 2025 rule changes come in. From April 2025, some side hustlers with small casual earnings may no longer need to file a tax return. Roughly 300,000 people were removed from Self Assessment obligations under this tweak (Gov.uk announcement).
But don’t misread this. If you’ve got consistent freelance income over £1,000 (that’s the “trading allowance”), you’ll still need to declare it (Self Assessment overview).
I’ve seen young professionals caught out here. One client in London did social media management “on the side” while employed full-time. Her freelance earnings hit £6,000, but she assumed PAYE covered everything. It didn’t – she needed to register for Self Assessment and pay both tax and Class 4 NICs on those profits.
Registering for Self Assessment as a Freelancer
If you’re new to freelancing in 2025/26, the deadline to register with HMRC is 5 October 2025 (Register for Self Assessment).
What you’ll need to do:
Create a Government Gateway account.
Register as self-employed.
Keep records of your income and expenses from day one.
File your first return by 31 January 2026 (covering profits from 6 April 2025 to 5 April 2026).
None of us likes paperwork, but I can’t stress this enough: HMRC penalties are steep if you miss deadlines. I once helped a Brighton-based copywriter who ignored his filing for two years – he racked up more in penalties and interest than his actual tax bill.
How Freelancers Actually Pay Their Tax
You’ll do it through the Self Assessment system. Here’s the cycle:
● Tax year runs 6 April – 5 April.
● Online returns must be filed by 31 January following the end of the tax year.
● Tax owed (plus NICs) must also be paid by 31 January.
● If your tax bill is over £1,000, you may also need to make Payments on Account (advance instalments for the next year).
More info: Deadlines for Self Assessment.
This “payments on account” rule is another nasty surprise. A client of mine, a freelance web developer in Birmingham, nearly fell off his chair when he realised his first year’s bill included next year’s tax in advance. Cash flow planning is critical here.
Why Many Freelancers Overpay or Underpay Tax
Freelancers often struggle with three main traps:
Mixing PAYE and freelance work – HMRC may not adjust your tax code correctly if you earn both employment and freelance income.
Not claiming allowable expenses – software, travel, a home office portion, etc. (Business expenses you can claim)
Misunderstanding VAT – if your turnover goes above £90,000, you must register (VAT registration).
I once helped “James”, a consultant in Leeds, who ignored VAT registration because he thought “turnover” meant profit. He hit £92,000 in revenue and ended up paying a penalty as well as backdated VAT.
Checking Your Tax Position as a Freelancer – Step by Step
What If You’re Freelancing and Employed at the Same Time?
Plenty of freelancers also have a regular job – maybe you work 3 days a week in marketing and freelance on the side. In these cases, HMRC will normally tax your employment income through PAYE and expect you to declare your freelance profits via Self Assessment.
Your main employment should carry your full Personal Allowance (£12,570 in 2025/26), but your freelance income is taxed on top, often at a higher rate.
See guidance here: Income Tax if you have other income.
I once advised a client in Nottingham – an employed teacher who tutored online. Her PAYE job already used her full allowance, so every penny of her tutoring profits was taxed at 20% plus Class 4 NICs. She hadn’t realised this and under-set aside her savings for tax, leading to a stressful January.
How to Check If Your Tax Code Is Correct
Your tax code tells your employer how much tax to deduct. Think of it as a “postcode for your income”. If it’s wrong, you may be overpaying or underpaying tax.
To check yours:
Log into your Personal Tax Account.
Review your tax code (most freelancers with employment income will see something like 1257L on their payslip).
If you have multiple jobs or freelance income, HMRC may use a second code (like BR, meaning all taxed at 20%).
Be careful here. I had a client, “Raj” in London, who freelanced while working as an IT contractor. HMRC accidentally split his Personal Allowance between his PAYE job and his freelance work, leaving him with an underpayment of nearly £2,000. Always check your code matches your situation.
Doing a Quick Freelance Tax Calculation Yourself
Let’s say you earned:
● £32,000 from your PAYE job.
● £18,000 from freelancing.
Here’s a rough breakdown for 2025/26 (England/Wales/NI):
PAYE job – employer deducts tax automatically, using your £12,570 allowance against this income.
○ Taxable = £19,430, taxed at 20% = £3,886.
Freelance profits – added on top.
○ All £18,000 falls into basic rate band.
○ Income Tax = £3,600.
○ NICs (Class 2 ~£179 + Class 4: 6% on £5,430 = £326, 2% on £5,430+ remainder) ≈ £1,075.
So total liability = about £4,675 on top of what PAYE has already taken.
Official HMRC calculators: Estimate your Income Tax.
This is exactly the kind of back-of-the-envelope check I recommend to clients. It stops nasty surprises later.
Emergency Tax Codes and Freelancers
Sometimes freelancers dip back into short-term PAYE contracts – and here’s where emergency tax codes cause chaos. You might see something like 1257 W1/M1 on your payslip, meaning HMRC is treating each payday as if it’s your first of the year.
The result? You may overpay tax.
Fix it by updating HMRC via your tax code service.
I recall a graphic designer in Bristol who freelanced most of the year but took a 3-month PAYE contract. His emergency code deducted over £900 too much. We filed his Self Assessment, and he got it refunded but it took months. Moral: always spot-check your codes.
High Income Child Benefit Charge for Freelancers
If you’re a parent claiming Child Benefit and your adjusted net income goes above £50,000, you may face the High Income Child Benefit Charge (HICBC). For every £100 over £50k, you lose 1% of the benefit, and it’s fully clawed back at £60,000.
More info: Child Benefit tax charge.
This is one of the nastiest surprises for freelancers who suddenly land a big contract. I helped a couple in Surrey – one PAYE, one freelancing – who didn’t realise the self-employed spouse’s profits tipped them over the line. They had to repay 3 years’ worth of Child Benefit plus penalties. Always factor this in if you’re near the threshold.
Handling Multiple Freelance Income Streams
It’s common now to juggle:
● A main freelance trade (say, copywriting).
● A small Etsy shop.
● Occasional Airbnb hosting.
HMRC wants all self-employed income combined on your Self Assessment return. You don’t get multiple Personal Allowances.
One of my clients in Leeds thought her Etsy sales under £1,000 were “hobby income” and didn’t count. But because her copywriting income already used up her allowance, the extra £800 still pushed up her tax bill. HMRC doesn’t see separate pots – it’s all one total.
Claiming a Refund If You Overpay
If you’ve been over-taxed – for example, due to an emergency code or PAYE plus freelancing misalignment – you can claim a refund through your HMRC account.
Refunds can be processed automatically if HMRC spots the error, but don’t count on it. I’ve seen many cases where clients only got their money back once we submitted their Self Assessment.
The Risks of Ignoring Side Income
HMRC’s systems are increasingly joined-up. Platforms like PayPal, Etsy, and Airbnb now feed data directly to HMRC. If you fail to declare freelance income, they’ll likely know.
I once advised “Laura”, a social media freelancer in Birmingham, who ignored her £7,000 side income for two years. HMRC wrote to her after cross-checking payment platform data. She faced penalties of 15% of unpaid tax, plus interest. It’s rarely worth the risk.
Practical Checklist – Mid-Year Freelancer Tax Health Check
Here’s a quick mid-year check I give my clients:
● Log into your Personal Tax Account.
● Check your tax code is correct.
● Estimate your tax using HMRC’s calculator.
● Keep records of all freelance income and expenses.
● Review if you need to register for VAT (VAT guide).
● If income > £50,000, check your exposure to the Child Benefit tax charge.
● Put aside at least 25–30% of your freelance income for tax/NICs.
Advanced Freelancer Tax Scenarios – Business Owners, VAT, and IR35
When Freelancers Cross Into “Business Owner” Territory
Many freelancers begin as sole traders, but once income rises, the question often arises: should you incorporate as a limited company?
As a sole trader, your profits are taxed through Income Tax and NICs under Self Assessment. But if you incorporate, the company pays Corporation Tax (currently 25% on profits above £50,000; 19% for small profits under £50k – see Corporation Tax rates). You then pay yourself via dividends or salary.
In practice:
● A freelance consultant in London earning £80,000 as a sole trader faced around £25,000 in Income Tax and NICs.
● By incorporating and taking a small salary plus dividends, his effective tax dropped by roughly £4,500 – though he picked up new admin like company accounts and payroll.
It’s not one-size-fits-all. I’ve seen clients save thousands by incorporating, but also others who regretted the extra complexity when profits dipped.
VAT Thresholds and Freelancer Decisions
The VAT registration threshold for 2025/26 is £90,000 turnover. Once you cross this, registration is compulsory (Register for VAT).
But here’s the nuance:
● If most of your clients are VAT-registered businesses, charging VAT isn’t a big issue – they can reclaim it.
● If you mostly serve consumers, it can make you look more expensive overnight.
There are schemes to soften the blow:
● Flat Rate Scheme – pay a fixed % of turnover, keep the difference. (VAT Flat Rate Scheme)
● Voluntary registration – sometimes useful even below £90k, if you want to reclaim input VAT on big purchases.
I once advised a photographer in Cardiff who deliberately registered early because she was upgrading her kit (£15k worth of cameras). She reclaimed £3,000 in VAT immediately. Smart move – but not suitable for everyone.
Freelancers and IR35 – Are You Caught?
If you freelance through a limited company, you may be caught by IR35 rules (off-payroll working). This essentially asks: are you really self-employed, or should you be taxed like an employee?
Key points:
● If you work through a client’s structure like an employee (fixed hours, controlled work, can’t substitute), IR35 may apply.
● Inside IR35: your pay is taxed like PAYE, with fewer allowances.
● Outside IR35: you keep the tax advantages of dividends, expenses, etc.
See: IR35 guidance.
I had a contractor in Manchester who was reclassified “inside IR35” by a bank client. Overnight, his take-home pay dropped by 20%. We restructured his contracts and working arrangements, giving him a clearer case for “outside IR35” in future.
Tax Variations in Scotland and Wales for Freelancers
We touched on this earlier, but let’s revisit with a business-owner lens.
● Scotland – higher bands mean more tax for many freelancers compared to England. I’ve had clients relocate from Edinburgh to Newcastle purely because of the tax difference.
● Wales – currently aligned with England, but the devolved power means this could change. It’s worth checking your residence status carefully if you live near the border (Scottish rates, Welsh Income Tax).
Payments on Account – Advanced Planning
Freelancers with tax bills over £1,000 must make Payments on Account towards the next year’s bill, due 31 January and 31 July (Payments on Account).
This often trips up new business owners. I once saw a Bristol web designer with a £9,000 bill in his first year – then HMRC demanded another £4,500 in advance for the next. That’s £13,500 due in one hit. With planning, you can build this into your cash flow and avoid sleepless nights.
Summary of Key Points
Freelancers must pay tax in the UK – income above £12,570 is taxable through Self Assessment, with NICs on top.
○ The Personal Allowance is frozen until 2028, dragging more into higher bands.
Employment plus freelancing complicates things – PAYE covers your job, but freelance profits stack on top and may push you into higher rates.
Check your tax code regularly – mistakes can lead to underpayments or refunds; always use your personal tax account.
National Insurance contributions matter – Class 2 and Class 4 add hundreds or thousands to your bill; budget for them early.
Small side hustles may be exempt – but over £1,000 in trading income means Self Assessment is required.
Emergency tax codes and multiple jobs cause errors – always review payslips and update HMRC if something looks wrong.
High earners face extra traps – Child Benefit clawback at £50k, 60% effective rate between £100k–£125k, and frozen bands.
VAT is a turning point – mandatory at £90k turnover, but voluntary registration or flat rate schemes may be beneficial earlier.
IR35 can reduce your take-home pay – contractors should review contracts carefully and understand if they’re “inside” or “outside”.
A tax accountant adds value – not just compliance, but proactive planning, stress reduction, and spotting savings you may miss.
How a Personal Tax Accountant Can Help a Freelancer With Tax Management
Managing taxes can be a complex and daunting task for freelancers in the UK. This is where the expertise of a personal tax accountant (who can be your freelance tax accountant) becomes invaluable. A personal tax accountant doesn't just help with filing taxes; they provide comprehensive support in managing, planning, and optimising a freelancer's tax obligations.
In-depth Understanding of Tax Laws and Regulations
Tax laws and regulations are often complex and subject to frequent changes. A personal tax accountant keeps abreast of these changes, ensuring that freelancers comply with current laws. They can navigate the intricacies of income tax bands, National Insurance contributions, VAT obligations, and other tax-related matters. This expertise is crucial in avoiding potential penalties due to non-compliance or errors in tax filings.
Tax Planning and Liability Reduction
One of the key benefits of hiring a personal tax accountant is their ability to help with tax planning. They can advise on the best strategies to legally minimize tax liabilities. This includes identifying allowable expenses that can be claimed to reduce taxable income, suggesting the most tax-efficient way to draw income from the business, and advising on pension contributions or other tax-saving investments.
Assistance with Self-Assessment Tax Returns
Completing and filing self-assessment tax returns is a major task for freelancers. A personal tax accountant can handle this process, ensuring accuracy and completeness. They can advise on which income to declare, calculate the correct amount of tax owed, and submit the tax return on behalf of the freelancer. This service is especially beneficial for those with multiple income streams or complex tax situations.
Guidance on VAT and Other Taxes
For freelancers whose earnings exceed the VAT threshold, registering and accounting for VAT becomes necessary. A personal tax accountant can assist in understanding when to register for VAT, how to account for it, and how to claim it back on eligible purchases. They can also provide guidance on other taxes that may affect freelancers, such as capital gains tax or corporation tax if operating through a limited company.
Help with Record-Keeping and Financial Organisation
Maintaining accurate financial records is crucial for freelancers. A personal tax accountant can advise on the best practices for record-keeping, ensuring that all income, expenses, invoices, and receipts are accurately documented. This is essential not only for tax purposes but also for understanding the financial health of the freelance business.
Advice on Business Structure
Freelancers often grapple with the decision of whether to operate as sole traders or set up a limited company. A personal tax accountant can provide advice on the most tax-efficient business structure based on the individual's circumstances, future business goals, and income levels.
Support During HMRC Inquiries
If HMRC decides to inquire or audit a freelancer's tax affairs, having a personal tax accountant can be a significant advantage. They can liaise with HMRC on the freelancer's behalf, provide required information, and offer support and advice throughout the process, alleviating stress and uncertainty.
Future Financial Planning
Apart from managing current tax affairs, personal tax accountants can also assist freelancers with future financial planning. This includes advice on saving for retirement, planning for large purchases, and managing cash flow effectively to ensure that tax liabilities and business expenses are covered.
Personalized Service and Peace of Mind
A personal tax accountant offers a service tailored to the specific needs of the freelancer. They can provide bespoke advice, taking into account the freelancer's unique financial situation, goals, and challenges. This personalized service offers peace of mind, knowing that tax affairs are handled by a professional.
For freelancers in the UK, managing taxes can be a significant source of stress and uncertainty. A personal tax accountant offers a comprehensive solution, providing expertise, support, and peace of mind. From ensuring compliance with tax laws to advising on tax-saving strategies, their role is integral to the financial success and stability of freelancers. By partnering with a personal tax accountant, freelancers can focus more on growing their business and less on the complexities of tax management.
FAQs on Freelancer Taxes in the UK
Q1: Can someone change their tax code mid-year if freelancing income wasn’t initially included?
A1: Absolutely—if HMRC hasn’t accounted for your freelance earnings and your code looks too generous, you’ll want to flag it. Log into your personal tax account and update HMRC with your expected freelance profit. In my experience, clients in Bristol who did that avoided unexpected £1,200 bills when their PAYE simply didn’t reflect side income.
Q2: What can someone do if HMRC’s estimate on their tax code overshoots due to short-term freelance work?
A2: In that case, the trick is to ask HMRC to switch to an emergency or week-one/month-one code while you sort out the totals. I had a graphic designer whose tax code assumed he’d freelance all year after a busy summer; switching codes saved him a refund headache later.
Q3: Can a freelancer working abroad temporarily avoid UK tax on that income?
A3: Not usually—UK tax is based on residency. If you're UK-resident but working abroad briefly, those earnings still count. I advised a videographer who worked two months in Spain without invoice adjustments; when she checked, it still had to go on her UK Self Assessment.
Q4: How does mixing pension contributions with self-employed income affect a freelancer’s tax bill?
A4: Fair point—pension contributions can bring your taxable profits right down into a lower band. For example, one client’s profits sat just in the higher-rate zone until she upped her pension contribution by £2,000, pulling her back into the basic-rate bracket and saving around £800 in tax.
Q5: What is the fastest way for someone juggling multiple income streams to check if they overpaid tax?
A5: The quickest method is a rough manual tally on a notebook: combine your salaried income (seen via payslips) plus freelance profits, compare to your personal allowance and bands—and if it doesn’t look right, submit a Self Assessment or use HMRC’s “check you’ve paid the right amount” tool. Clients in Leeds tell me doing that saved them panic in January.
Q6: Is there a way for a self-employed individual to reclaim NICs if they had a slow earning start to the year?
A6: Yes—if your profits fall below the small-profits threshold for the year, you can apply for a Class 2 NIC waiver or repayment. Many shop-keepers I’ve worked with set aside money but then learned they didn’t need to pay after all—worth checking.
Q7: Can someone working split-across England and Wales end up overpaying?
A7: Rare, but it happens—if your PRSI or residency code isn’t updated promptly, HMRC might not apply the correct rate. A client moving from Cardiff to Bristol had an over-deduction until we flagged the change; got it fixed within a few months.
Q8: What happens if a freelancer misses the £1,000 trading-allowance threshold and forgets to register?
A8: That’s common. If earnings exceed the allowance but you haven’t registered, HMRC may send a “reminder letter” and late-filing penalty, even if the tax owed is small. One part-time dog-walker friend of mine got one despite only earning £1,200—simple fix, but a nuisance.
Q9: How can someone with fluctuating freelance income smooth their Payments on Account?
A9: You can ask HMRC to adjust them if you expect less earnings next year. I’ve had freelance consultants ask this mid-year after client drops—and it’s saved them from two unexpected lump-sum payments of around £4,000 each.
Q10: What if someone sublets via Airbnb occasionally—how should they handle that income?
A10: If you’re not renting out your home regularly, there’s a rent-a-room allowance (up to £7,500 tax-free). Anything beyond that, or commercial-style lets, should go in Self Assessment under property income. Clients doing a few short lets always ask me if that allowance covers them—it usually does.
Q11: Can a freelancer deduct home-office costs even if they’re also in employment?
A11: Yes—if you use a room for freelance work, you can apportion household costs like council tax or heating. One client added just 10% of their heating bills to expenses and knocked nearly £300 off their tax liability.
Q12: What should a freelancer do if HMRC starts collecting platform income data they weren’t expecting?
A12: Don’t panic. Review actual profits, use the Self Assessment “other income” box, and include a note explaining it’s hobby versus business income. I helped a clever crafter in Exeter do just that—and HMRC accepted her friendly submission without penalty.
Q13: How can someone check if they’re above the “60% tax trap” income without doing full maths?
A13: Pull your estimated total income and compare it to £100k; every £2 above that reduces your personal allowance by £1. I had one busy freelancer working out that a £10k bonus would cost her 60% of that in combined tax—so she timed it for April to split the hit.
Q14: If someone in Scotland and Wales both supply digital services globally, do they both face different tax?
A14: They’ll pay general Self Assessment, but Scottish-resident freelancers face steeper bands; Welsh ones match England. If rates change in Wales later, that could shift things. Hint: always check your council area, just in case.
Q15: Are emergency tax refunds from sudden freelance earnings easy to get back?
A15: Not always. Filing your Self Assessment with the details is the surest route—even if HMRC adjusts manually, I’ve seen clients wait months without a return. Best is to file early and get the correction done.
Q16: What’s a quick way for freelancers to avoid tax code mistakes after taking a big bonus?
A16: After a bonus, check your year-to-date tax via your personal tax account. If it seems off, message HMRC to get a corrected code. A graphic designer client did that and avoided a £600 overpayment.
Q17: Can pension-age freelancers reduce NICs without losing state-benefit rights?
A17: Yes—over State Pension age, Class 2 and 4 NICs don’t apply. But younger workers may still want to make voluntary Class 3 contributions to ensure NI records. I’ve had clients over 66 surprised to owe nothing—but delighted!
Q18: If someone’s freelance work ends mid-year, can they cancel Self Assessment?
A18: Yes. Once your business stops and returns to zero income, you can notify HMRC to cease Self Assessment. I helped a photographer do this after a career pivot—less paperwork next year.
Q19: What happens if someone delays their Self Assessment because they think they’ll owe nothing?
A19: Don’t assume. HMRC still expects a return—you’ll get automatic £100 late-filing fines, even if tax due is zero. A baker client learned that the hard way—zero tax, £100 fine, and a reminder that assumption is the enemy.
Q20: Can a freelancer claim capital gains relief if they sell old equipment?
A20: Yes—assets used in your trade, like old laptops, may fall under Capital Allowances or even be listed as disposals if sold. I had a graphic retoucher claim relief on a sold monitor and knocked a small chunk off her gains liability.
About the Author
Adil Akhtar, ACMA, CGMA, serves as the CEO and Chief Accountant of Pro Tax Accountant and leads Advantax Accountants. With over 18 years of experience in tackling complex tax issues, Adil is a distinguished tax blog writer. For more than three years, his engaging and insightful blogs have provided UK taxpayers with clear, practical guidance. Combining technical expertise with a passion for simplifying finance, Adil has established himself as a trusted voice in tax education.
Contact: adilacma@icloud.com
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