What Is Self-Employed Tax?
- Kyle Randall
- Jan 14
- 3 min read
Understanding Tax for the Self-Employed
If you work for yourself, one of the first questions you’ll ask is: “How does tax work when I’m self-employed?”
Self-employed tax is different from employment tax because nothing is deducted automatically. Instead, you’re responsible for reporting your income, calculating tax, and paying HMRC yourself.
In this guide, we explain what self-employed tax is, what you pay, and when you pay it — in simple terms.
What Does Being Self-Employed Mean for Tax?
You’re usually classed as self-employed if you:
Work for yourself
Invoice clients
Aren’t paid through PAYE
Are responsible for your own tax
Common examples include freelancers, contractors, tradespeople, consultants, and people with side businesses.
What Tax Do Self-Employed People Pay?
If you’re self-employed, you usually pay:
Income Tax on your profits
National Insurance
Any other taxes that apply to your situation
Importantly, you pay tax on profits, not total income.
What Are Profits?
Your profits are calculated as:
Income – Allowable business expenses = Profit
This is why claiming the correct expenses is important — it directly affects how much tax you pay.
How Do You Pay Self-Employed Tax?
Self-employed tax is reported and paid through a Self Assessment tax return.
This involves:
Reporting your income
Declaring allowable expenses
Calculating tax and National Insurance
Paying HMRC directly
You can learn more about this on our Self Assessment services page.
When Do Self-Employed People Pay Tax?
Unlike employees, self-employed people usually pay tax after the tax year ends.
Payments are typically due:
Once after submitting your tax return
Sometimes in advance, depending on your tax bill
Missing deadlines can result in penalties and interest.
Do You Still Get a Tax-Free Allowance?
Yes. Self-employed people still benefit from a tax-free personal allowance, just like employees.
Tax only applies once your profits exceed this allowance.
What Happens If You Don’t Pay Self-Employed Tax?
If you don’t register, report, or pay correctly, you could face:
Late filing penalties
Interest on unpaid tax
HMRC compliance checks
Staying organised early helps avoid stress later.
Official HMRC Guidance
You can find official guidance on self-employed tax on the HMRC website:
How VIP Accounting Ltd Can Help
At VIP Accounting Ltd, we help self-employed individuals across Benfleet, Essex and the UK:
Register as self-employed
Prepare and submit Self Assessment tax returns
Identify allowable expenses
Reduce tax where possible
Stay fully compliant with HMRC
If you’re unsure how self-employed tax works, speak to our team via our contact page.
FAQs
Do I pay tax straight away when I’m self-employed?
No — tax is usually paid after the end of the tax year.
Do I need to register even for small amounts of income?
You usually need to register once income exceeds £1,000.
Is self-employed tax higher than employed tax?
It can feel higher because nothing is deducted automatically.
Can I reduce my self-employed tax bill?
Yes — through allowable expenses and tax planning.
Who Wrote This Article
Kyle Randall, Founder of VIP Accounting Ltd, provides clear, practical guidance to help individuals and business owners understand UK self-employed tax and stay compliant with HMRC.
VIP Accounting Ltd is a strategic accounting and tax advisory firm based in Benfleet, Essex, supporting self-employed individuals and businesses across the UK with tax planning, Self Assessment, accounting, and HMRC compliance.
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