How to become self-employed in the UK

1. Check you are trading

GOV.UK says you are probably trading if you sell things regularly to make a profit, make things to sell, earn commission, or are paid for a service. Selling a few of your own unwanted things is usually not trading. You can be employed and self-employed at the same time.

Most people start as a sole trader. It is the simplest set-up, but you are personally responsible for any business debts. The alternative is a limited company, which costs £100 to register online at Companies House and comes with more paperwork. If you are unsure, speak to an accountant before you choose.

2. Choose a name

You can trade under your own name or a business name. A sole trader’s business name must not include “Ltd”, “LLP” or “plc”, must not be offensive, and must not be the same as an existing trade mark. Some words, such as ones that suggest a link to government, need permission. Put your own name and your business name on invoices.

Check the matching domain name is available before you settle on a name. A short .co.uk that matches your business name is easier for customers to remember.

3. Register with HMRC

Once your income from self-employment goes over the £1,000 trading allowance in a tax year, you must register for Self Assessment. The deadline is 5 October after the end of the tax year you started in. For the 2025 to 2026 tax year, that was 5 October 2026. HMRC can fine you for registering late.

After you register, HMRC sends your Unique Taxpayer Reference (UTR). You then file a tax return each year, online, by 31 January, and pay any tax due by the same date.

4. Keep records

Record what you earn and what you spend on the business, and keep the receipts. Cash basis, where you record money when it actually comes in or goes out, is now the default for sole traders. Keep records for at least 5 years after the 31 January filing deadline.

Making Tax Digital for Income Tax means using software and sending HMRC quarterly updates. It depends on your turnover (your income before expenses):

5. Set money aside for tax

You pay Income Tax and National Insurance on your profit, which is your income minus allowable expenses.

Since April 2024 you no longer pay Class 2 National Insurance if your profits are £7,105 or more; it is treated as paid, which protects your State Pension record. Below that, you can choose to pay voluntarily at £3.65 a week. Scotland has different Income Tax bands.

Once your tax bill passes £1,000, HMRC usually asks for payments on account: two advance payments towards next year’s bill, each half of this year’s, due on 31 January and 31 July. This catches many people out in their second year, so put a share of every payment you receive into a separate savings account.

You must register for VAT if your turnover over the last 12 months goes over £90,000.

6. Check insurance, licences and data rules

• Employers’ liability insurance is a legal requirement once you employ anyone outside your close family, with at least £5 million of cover.
• Public liability insurance is optional, but GOV.UK’s business support service says almost all businesses need it. If you visit customers’ homes or they visit you, get it.
• Licences: some activities need one, such as selling food or alcohol, street trading or animal boarding. Use the GOV.UK licence finder.
• Data protection fee: if you hold customer details on a computer or phone for more than accounts, staff admin and your own marketing, you probably need to pay the ICO fee. It is £52 a year for most small businesses, or £47 by direct debit.
• Working from home: check with your mortgage lender or landlord, and tell your home insurer. You can claim part of your household costs, or use HMRC’s flat-rate simplified expenses.

7. Get your business online

Customers will look you up before they get in touch, even if a friend recommended you. Three things help most when you are new:

1. A Google Business Profile. It is free and puts you on Google Maps. If you visit customers, hide your address and list the towns you cover.
2. A simple website. It should show what you do, where you work, rough prices and how to contact you, on one screen of a phone. Our website cost guide compares the options.
3. Reviews from your first customers. Ask every customer, not only the happy ones, and never offer anything in return. Both are against Google’s rules and UK consumer law.

Our guide to getting your first customers goes into more detail.

Starting alongside a job

Many people test a business in evenings and weekends before leaving employment. You can be employed and self-employed at the same time. Your employer still takes tax from your wages through PAYE, and your business profit is added on top in your tax return, so your Personal Allowance may already be used up by your salary.

Check your employment contract for rules on outside work or working for competitors. If you sell through apps or marketplaces, they now report sellers to HMRC: since January 2024, platforms report anyone who makes 30 or more sales of goods or receives about £1,700 (€2,000) or more in a calendar year, and anyone selling services. HMRC says this is not a new tax, but income over the £1,000 trading allowance still needs declaring.

A business that covers your costs while you are employed is a useful test before you hand in your notice. Your income in the first months is likely to be uneven, so savings or a partner’s income help.

Funding and Universal Credit

Start Up Loans from the British Business Bank lend up to £25,000 per person at a fixed 7.5% interest rate, repaid over 1 to 5 years, with 12 months of free mentoring and no arrangement fees. You must be 18 or over, live in the UK, and be starting or have been trading for up to five years.

If you claim Universal Credit, self-employment that is your main job may mean UC assumes a minimum income, the minimum income floor, after a 12-month start-up period. Talk to your work coach before you start. The New Enterprise Allowance closed to new applicants in 2022.

Free help in Sussex

• Business Brighton & Hove (the city’s Growth Hub): free council-funded support for starting and growing a business.
• BIPC Sussex at Jubilee Library, Brighton: free and low-cost workshops, one-to-ones and business databases, plus regular small business surgeries.
• East Sussex Growth Hub: free impartial advice and programmes, including Lewes District business start-up support.
• West Sussex Growth Hub: free one-to-one advisers and mentors, run by West Sussex County Council.