UK Freelancer Tax Guide 2025-26: What You Owe and When to Pay
Freelancing gives you control over your work — but it also means HMRC no longer handles your tax automatically. You are responsible for registering, calculating, and paying your own tax. This guide covers everything a UK freelancer needs to know for 2025-26.
Step one: register for Self Assessment
You must register with HMRC as self-employed by 5 October following the end of your first tax year of freelancing. If you started freelancing in 2024-25 (ending 5 April 2025), the registration deadline was 5 October 2025. You register online at gov.uk/register-for-self-assessment.
What taxes do freelancers pay?
As a freelancer (sole trader), you pay three types of tax on your profits:
- Income Tax: on profits above the Personal Allowance (£12,570 in 2025-26), at 20%, 40%, or 45%
- Class 2 National Insurance: a flat £3.45 per week (£179.40 per year) if profits exceed £12,570 — though this may be included in Class 4 NI from 2025-26 onward following HMRC simplification changes
- Class 4 National Insurance: 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270
Example: £40,000 freelance profit (2025-26)
| Tax / NI | Calculation | Amount |
|---|---|---|
| Income Tax | 20% of (£40,000 - £12,570) | ~£5,486 |
| Class 4 NI | 6% of (£40,000 - £12,570) | ~£1,646 |
| Class 2 NI | £3.45 × 52 | £179 |
| Total tax | ~£7,311 |
Payment on account: paying next year's tax in advance
Once your Self Assessment tax bill exceeds £1,000, HMRC requires you to make payments on account — advance payments toward the following year's tax bill. These are:
- First payment on account: 31 January (50% of last year's bill)
- Second payment on account: 31 July (another 50%)
- Balancing payment: 31 January the following year (any remaining balance)
This means in your second year of freelancing, you effectively pay up to 150% of your first year's bill in a single January. Many freelancers are caught out by this — set aside tax regularly from day one.
Allowable expenses
You can deduct business expenses from your income before calculating profit. Common allowable expenses include:
- Equipment, computers, and software used for work
- Professional subscriptions and training
- Accountancy and bookkeeping fees
- Business travel (not commuting)
- Home office costs (HMRC simplified rate: £10/month for 25–50 hours/month worked at home)
- Marketing and advertising
IR35 and off-payroll working
If you work through a limited company (rather than as a sole trader), the IR35 off-payroll working rules may apply. If your working relationship resembles employment — regular hours, a single dominant client, equipment provided by the client — your income may be treated as employment income for tax purposes. Private sector clients (medium and large businesses) determine IR35 status since April 2021.
Frequently asked questions
Do I need to charge VAT?
You must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period. Below this threshold, registration is voluntary — though it can be beneficial if your clients are VAT-registered businesses.
Can I use the trading allowance instead of deducting expenses?
Yes. If your gross trading income is £1,000 or less, it is completely tax-free under the trading allowance. If it exceeds £1,000, you can choose to deduct either your actual expenses or the £1,000 allowance — whichever is lower will never be worthwhile, so compare them.