⚠️ We are currently updating our 2020/21 tax guidance across the website
This section is for you if you are self-employed and on a low income. Self-employed people are those who ‘work for themselves’.
You can be self-employed in a number of ways including as a sole trader, in a partnership, through the Construction Industry Scheme (CIS) and working in the gig economy. You may also be employed and self-employed at the same time, for example you could work part-time in the day and run your own unrelated business in the evenings. You may also have more than one self-employment business, these are known as multiple trades.
This section explains how tax and National Insurance works if you are self-employed. You will have to deal with HM Revenue & Customs (HMRC), as they assess and collect tax and pay out tax credits and other benefits.
HMRC do not always get things right. So, it is important for you to check the tax you pay on your self-employment income. You may also need to contact HMRC if you do not understand something or if you disagree with them.
In this section, we provide information which we hope will enable you to understand the tax and National Insurance contributions arising from your self-employment. It is easier and cheaper in the long run if you can understand and deal with your own tax affairs.
⚠️ We cover some of the issues that you may face because of the coronavirus outbreak (COVID-19) in the relevant pages of this section but you will find additional information in our coronavirus guide.
There are a number of things to consider when you first become self-employed and then there are requirements that must be considered on an ongoing basis. This flowchart sets out these various stages and links to where can you find further detailed information about each stage in this section of our website.
It is sometimes difficult to know whether you are employed or self-employed but it is important you understand which category you fall into so you can get your tax right (this is addressed in the first box shown in the flowchart below). So, the first page of this section of the website will help you establish whether you are employed, self-employed, both or neither. Assuming you are self-employed then the rest of the section will tell you what you need to know about dealing with tax and National Insurance contributions when you work for yourself. In particular, we provide information on the following areas: Am I employed, self-employed, both or neither?
- How do I register for tax and National Insurance?
- What business records should I keep?
- Working out profits, losses and capital allowances
- How do I work out my taxable profits?
- How do I prepare my accounts?
- What business expenses are allowable?
- Can I claim for pre-trade expenses?
- What capital allowances can I claim?
- What if I make a loss?
- When do I make Self Assessment payments and file my tax return?
- What tax allowances am I entitled to?
- What is the trading allowance?
- How do I pay tax on self-employed income?
- What National Insurance do I pay if I am self-employed?
- What is the Construction Industry Scheme (CIS)?
- How do I work out my profits for universal credit?
- Do I have to pay VAT if I am self-employed?
- What is Making Tax Digital for VAT?
- Pensions and self-employment
- How do I repay my student loan if I am self-employed?
- Penalties and enquiries
For information on the scope of the help that you can expect to find in this section, please see the About Us section.
Our guide to self-employment is intended to supplement the material in this section. It explains the less common tax rules and contains more detailed information including a case study showing how to prepare accounts and what to include on your tax return. We wrote this guide to help advisers (non-tax) who advise low-income self-employed individuals and also for self-employed people who want more detailed information in one accessible place.
If you are employed, we suggest you visit our employment section.
If you have come from abroad to work in the UK, we suggest you also visit our migrants section.
Our tax credits section contains information on working tax credit (government support to supplement a low income) and child tax credit (to help those with children). Both of these types of tax credit, together with certain other benefits, are gradually being replaced by universal credit.
If you think you might be entitled to state benefits, we provide an overview of the main benefits.
If you do not agree with a decision of HMRC, find out what action you can take on our tax appeals page.
If you are unhappy with the way in which you have been treated by HMRC, you may be able to make a complaint.
You can find out where to get help from third party organisations in our getting help section.