How to Do a Tax Return when Self Employed: Step-by-Step Guide

Looking to run a stress-free, compliant business as a freelancer or self-employed individual year-round? If so, it’s crucial to be accurate and deliberate with tracking, filing and submitting your tax return.

Knowing how much to set aside, which costs can be deducted, and when the key yearly deadlines are can make your tax return a breeze – and save precious money and effort.

In this article, we’ll break down all the key steps and show you why paying tax as a self-employed individual can be exciting as well as necessary.

We’ll also explain how a Wise Business account can keep your finances in check: with exportable statements and easy scheduled transfers, you’ll never face a spreadsheet panic at midnight again.

Register for Wise Business ✍️

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Overview

Step	Summary
Step 1: 📅 Register	Register as self-employed with HMRC by 5 October if your self-employed income exceeds £1,000.
Step 2: 🧾 Keep Records	Track all invoices, payments, and expenses; keep business and personal finances separate.
Step 3: 📉 Review Expenses	Identify all "wholly and exclusively" work-related costs (like software or travel) to deduct.
Step 4: 🧮 Calculate Profit	Calculate your taxable profit (Total Income minus Allowable Expenses) to see what you owe.
Step 5: ✍️ File Return	Use your records and UTR (Unique Taxpayer Reference) to complete your Self Assessment tax return.
Step 6: 💰 Pay Your Bill	Set aside 25–30% of your earnings to pay the tax bill, which is due by 31 January and 31 July.

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This article covers taxes for self-employed individuals and freelancers. If you're looking for information on corporate tax, read our United Kingdom Corporate Tax guide.

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Step 1: Register as self-employed with HMRC

Start by letting HMRC know that you are self-employed¹.

Then, if your earnings exceed £1,000 in a tax year, you should register for Self Assessment, which is a particular way of reporting your earnings to the government.

You must register by 5 October following the end of the first tax year in which you earned your self-employed income.

Once you do, HMRC will process your form, notify you that they’re aware of your self-employment, and issue you with a Unique Taxpayer Reference (UTR) number that identifies you in their system².

Step 2: Complete your financial records

You should ensure that all your financial records from the previous year are complete. This includes income from your main job if you freelance part-time.

HMRC expects self-employed workers to record all their income and business expenses in the form of invoices, receipts and bank statements (you can read more about this in our guide to expense report best practices.

Running a tidy business account makes record-keeping smoother, helps you avoid mistakes that could lead to penalties, and allows you to capitalise on tax deduction opportunities for extra cash.

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💡 A Wise Business account is a game-changer for running a tidy business account, since it automatically categorises transactions, keeps exportable statements, and lets you match payments to invoices with ease.

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Step 3: Review your expenses and deductibles

Before you can calculate what self-employed taxes you owe, it’s vital to review all of your business expenses and confirm which ones are deductible, meaning that they can be subtracted from your taxable profit.

What expenses can I list?

HMRC allows you to claim any costs that are incurred “wholly and exclusively” for your self-employed work, such as:

• Laptops
• Design software
• Office supplies
• Travel costs for client meetings
• Advertising
• Training
• Insurance
• Professional subscriptions³

If you work from home, you can also claim a portion of your household bills, either by calculating a percentage based on space and time used or by using HMRC’s simplified flat-rate system⁴.

Step 4: Calculate your taxable profit

Once you’ve reviewed your expenses and identified what you can claim, you can calculate your taxable profit.

This is your total self-employed income minus all allowable business costs. The result determines how much Income Tax and National Insurance you owe for the year.

If your income is under £1,000, you will be covered by the trading allowance and do not need to pay tax on that income, but once your profits exceed the personal allowance (currently £12,570 for 2025/26), those earnings become taxable⁵.

If you work a full-time job alongside part-time freelancing, you are taxed on those incomes collectively.

Here's an example to illustrate:
Margaret works full-time as a marketing executive earning £30,000 a year.
She also does freelance design work, making £8,000, with £2,000 in expenses, leaving £6,000 in taxable profit.
Since her salary already uses up the £12,570 personal allowance, that £6,000 profit is added to her main income, bringing the total to £36,000.
This amount falls in the basic rate band and is taxed at 20%, plus any National Insurance contributions (NICs).

Note: National Insurance contributions are additional payments self-employed individuals make toward state benefits such as the State Pension and certain allowances. They’re based on your profits, not your total income, and are separate from income tax.

The following Income Tax rates and bands are for England, Wales, and Northern Ireland for the 2025/26 tax year:

Band / Allowance	Income Range	Tax Rate
Trading Allowance	Up to £1,000 (gross income)	0%
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 – £50,270	20%
Higher Rate	£50,271 – £125,140	40%
Additional Rate	Over £125,140	45%
Class 2 NICs	Up to £6,844	£3.50 per week (voluntary)
Class 2 NICs	£6,845 and above	0%
Class 4 NICs	£12,570 – £50,270	6% for the stated range, and 2% if the income is over £50,270

Step 5: Complete your Self Assessment tax return

The Self Assessment tax return is a way of reporting your taxable income to HMRC.

Along with the records we have mentioned above, you’ll need a ten-digit Unique Taxpayer Reference (UTR), contributions to charity or pensions that might be eligible for tax relief, and your P60 or other records showing how much income you’ve already paid tax on.

Some might view the process of paying taxes as an administrative slog, but in reality, it’s an opportunity to avoid financial complications - and potentially save money when other forms of employment can’t.

Why is it important to do your Self Assessment properly?
1. You build credibility for your business. A well-maintained return shows lenders, mortgage providers, or potential partners that you run your business professionally, and often makes it easier to take out a loan.
2. You save big, reducing your tax bill. Careful tracking ensures you claim every allowable expense you’re entitled to, lowering your taxable profit and the tax you owe.
3. You simplify future tax filings. Once you start the ball rolling, the next year’s process of filing records and submitting them to HMRC gets far easier, because your systems are already in place.

Keeping HMRC happy is easier when your books behave themselves.

Wise Business syncs seamlessly with accounting software, so you can spend less time wrestling with spreadsheets and more time running your business.

Step 6: Pay your tax bill

Once you’ve submitted your tax return, HMRC will confirm the amount of Income Tax and National Insurance you owe.

Payments are usually made twice a year: the main payment deadline is 31 January, followed by a second “payment on account” by 31 July⁶.

These instalments help spread the cost of next year’s tax so you don’t face one large bill at once.

If your income drops or your circumstances change, you can ask HMRC to reduce your payments on account, ensuring you don’t overpay.

Managing this process carefully helps protect your cash flow, especially if your income fluctuates during the year.

The easiest way to stay on top of your tax bill is to plan ahead and build good financial habits:

Set aside a percentage of each payment you receive - around 25 to 30% is a sensible rule of thumb to cover both tax and National Insurance.

Use a separate, dedicated business account like Wise Business to hold your self-employed income so you can clearly see what’s available for tax, expenses, and personal spending.

Automate the boring bits using a tool like Wise Business to set aside tax money as you earn, so when 31 January rolls around, you’re the calmest freelancer in the room.

Track your income in real time to understand how much tax you’ll likely owe, rather than estimating once a year.

Review your balance every month to check you’re on target and avoid surprises when the January or July deadlines arrive.

Enjoy stress-free money management as a self-employed individual with Wise Business

Self-employment has enough moving parts – your money doesn’t need to be one of them. Wise Business keeps everything running smoothly, whether you’re chasing invoices or paying HMRC on deadline day.

Receive and store payments from UK or international clients using local account details, make transactions while earning 0.5% cashback, and convert between 40+ currencies at the mid-market exchange rate with no hidden fees.

Plus, to make tax time even easier, you can sync with accounting software like Xero and QuickBooks to streamline your bookkeeping.

Take the stress out of self-employment and focus on growing your business.

Be Smart, Get Wise.

Register for Wise Business ✍️

FAQs

When do I need to pay tax as a self-employed person?

Date	Event
6 April	New UK tax year begins – start tracking income and expenses
5 October	Deadline to register as self-employed with HMRC
31 October	Deadline for paper tax returns
31 January	File your online tax return, pay your bill, and make your first payment on account
5 April	Tax year ends – prepare records for your next return
31 July	Second payment on account due
All year	Keep records, save for tax, and stay organised with a Wise Business account

Are there other tax reliefs that self-employed individuals and freelancers can claim?

We’ve already mentioned the trading allowance, which lets you claim up to £1k of tax-free income, but there’s also the Annual Investment Allowance (AIA), which lets you deduct the full cost of most major business equipment up to £1 million⁷.

You can also claim simplified expenses, pension contribution relief, and certain business mileage deductions to further reduce your tax bill and get ahead.

How do I amend a return if I make a mistake?

If you realise you’ve made a mistake on your Self Assessment tax return, you can amend it online through your HMRC account within 12 months of the original filing deadline.

For example, a 2023/24 return filed by 31 January 2025 can be corrected until 31 January 2026. After that, you’ll need to contact HMRC directly in writing to request an amendment or claim overpayment relief if you’ve paid too much tax⁸.

Sources:

1. GOV.UK, Working for yourself
2. GOV.UK, Find your UTR number
3. GOV.UK, Expenses if you're self-employed
4. GOV.UK, Simplified expenses if you're self-employed
5. GOV.UK, Income Tax rates and Personal Allowances
6. GOV.UK, Understand your Self Assessment tax bill
7. GOV.UK, Claim capital allowances
8. GOV.UK, Self Assessment tax returns

Sources last checked on October 29th, 2025