Self Employment – The Basics

The trend for self-employment in the UK is rising. A study from the ONS shows that since 2001, the percentage of the labour force in self-employment grew from 12% in 2001 to 15.1% in 2016, and continued to rise throughout, and since, the economic recession of 2008. It may be that, with the move towards contract work rather than permanent positions, large companies in sectors like retail making huge cuts, and the ongoing uncertainty of what Brexit means, workers are far happier to take their lives into their own hands. Getting started with being self-employed can be daunting, so we are compiling a short list of the basics for you.


While it does remove the security that, for example, a mandatory pension might give you, there are plenty of ways that you can make self-employment work for you. Please note: these tips are for a sole UK worker, and shouldn’t be relied upon for setting up overseas.


Registering with the Government

In order to pay the correct taxes, you need to register with HMRC. This is pretty easy these days; the government website has been set up to be as accessible as possible, and if you do need help, their phone lines aren’t as nightmareish as people would have you believe. You can get a fine if you register after October 5 of your second tax year. It is allowed to mark the start of your tax year on any date you wish; if you’re unsure, it might be simpler to use April 6 (the same as the government’s tax year) so that your returns deal with full years instead of two separate part-years.


Tax Returns

You can file your tax returns at any point from April 6 until January 31 the following year (earlier if you are completing a paper return, but if you have internet access, online is much easier). So, for example, until January 2019 you could file for the year April 2017–April 2018. When you have filled out the forms and they have calculated how much tax you owe, you have until January 31 to pay it, regardless of when you have filed.


What you need at hand to fill out a tax return:

  • All of your income. You can work on an invoice basis or a cash basis (this is a tickbox option in the tax return). Cash in this instance just means the money you actually get, rather than the money you ask for. You can tell them the total sum, or break it into parts.


  • All of your relevant expenditure. If you work from home you can include a proportion of rent/bills, according to how much you use. For example, if you work from home full time, and use half of your house, you could calculate 50% of 35 hours a week, which is about 10% (of 168 hours in a week). If you usually work elsewhere but spend 10 hours working at home, it would be 5/168. Relevant expenditure is also items that you buy specifically for work, and travel. There are separate sections for larger items such as machinery or cars. Keep receipts – if you get audited, you want to be able to prove everything.


  • If you are employed as well as self-employed, you can put it all on the same tax return; it’s pretty straightforward to do the employed section, you just need to know exactly how much you’ve been paid, and how much tax has come off that (from a P60, a P45, or by adding up individual pay slips).


  • Sometimes, depending on what they determine your next year’s income might be, they might include an amount to put “on account”, and split out the payments between January and July. This is an extra payment that will go towards your next year’s tax bill, so there’s a bit less pressure for the next January. If it’s likely you won’t earn the same amount next year (for example if you are returning to education) then you can appeal the amount to reduce it.


  • When you’re done, you can submit it, and print/preview your own copy. At that stage (as long as you’re not doing it last minute), you can go back and make changes, so don’t stress. If you’re thinking “oh, that looks really high” and then realise you forgot to include your rent – that’s OK. You can go back and they’ll recalculate it for you. So do it as soon as you can, so you’ve got time to take it away and think about it, and make sure you included everything.


If you can, save a bit of everything you make so that you aren’t surprised by the amount you have to pay. You may be required to pay either Class 2 or Class 4 National Insurance contributions as well, depending on your income (though there are plans in place to abolish Class 2 contributions in April 2019). If you have a student loan to pay off, that gets mentioned here too – if you’re making over £21,000 then you’ll have a bit of that to pay as well as tax, though it all gets lumped in together so you just have to make one payment.


You can, of course, hire an accountant to do all of this for you – there are plenty of them out there who will charge one-off fees specifically for an end-of-year tax return, and if you have particularly complex accounts, this could make your life a lot easier.




So what happens when you get sick, or can’t work for another reason? There are various companies out there that offer self-employment insurance for just this. It boils down to whether you are willing and able to save some money yourself for emergencies, or whether you’d rather an insurance company protect that for you. The Money Advice Service offers a good impartial guide with more detail.



Trade Unions

Depending on which industry you’re in, your trade union may already offer membership for freelancers and self-employed workers. If not, IPSE may be the association for you.




When you don’t have a big organisation’s marketing budget behind you, finding work can sometimes feel like a slog. Start to build personal connections with people who could be your clients. Go to events, join in conversations on social media, make sure your LinkedIn profile and headline indicate what your main skills are and that you’re looking for work. Sending an email out to your relevant contacts to let them know that you have availability for projects or jobs can be very useful; if they don’t have work, they might know someone who does. There are often forums and platforms for freelancers to find work in specific areas. The government has its own bidding section where you can look for appropriate jobs; Upwork and Freelancer are just two of many per-hour or per-job bidding sites; and Reedsy is a vetted platform for designers, artists, writers and editors to work on publishing.



Working Practices

Now you’re all set up and ready to get working, how do you go about it? Depending on what kind of work you do, you might be working for long periods of time on your own, with nobody checking in on you. This can foster either heavy procrastination or working all hours of the day without breaks, so it’s important to set up a routine for yourself. Take regular breaks, go for walks (if you work from home, pretend you have to walk to work anyway, to get a bit of fresh air), eat, and determine a ‘stopping time’ at the end of the day so you have time to relax.


If you’d rather not work at home, there are many co-working companies who offer desks on a per-month rate in serviced offices, where you can be amongst company and even make new self-employed friends (or clients!). These range from national companies to small, one-location offices, so it’s best to research your local area to find out what’s available. If nothing else, if the café down the road offers wifi, they might appreciate the custom of a couple of cups of coffee every day.


It’s tempting to take all the work that comes your way – and financially it may be necessary for a while – but try to weigh up whether it’s practical. If it means you won’t get any sleep, it’s a problem. If it means you have to cancel a holiday, it’s a problem. You won’t frighten away clients by saying that you don’t have availability for the time they need (you can always suggest an alternative timeframe), but you might by taking on the work and not being able to complete it.


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Author: Katherine

Katherine is a qualified careers advisor and a member of the Career Development Institute. She has just begun a PhD programme to research meta-skill development in the workplace, and is a fiction editor and publisher in her spare time. You can find her on Twitter at @katobell.

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