What going self-employed means for tax
When you work for yourself, how tax is worked out and how it’s paid is a bit different to other jobs. In fact, it’s probably the biggest change to get to grips with.
We’ll explain how it all works, so there’ s nothing to worry about.
Tax is different when you’re self-employed
When you’re employed, your employer takes tax from your wages before you’re paid. This is all done automatically through a system called ‘Pay As You Earn’, (or PAYE). You can read more about it in our PAYE page. Essentially, a lot of the tax is worked out for you.
When you’re self-employed, no one does this for you. Instead, it’s up to you to tell us how much money you make by doing a tax return. It helps work out how much tax you might owe. We’ll then let you know how and when to pay it by.
That sounds a bit scary, but over 12 million people in the UK do it, and understanding the basics can really help you handle things.
How to do a tax return
There are two different ways to complete a tax return: Self Assessment and Making Tax Digital for Income Tax. You’ll only need to do one of these for your business income.
How Self Assessment works
- You fill out a full Self Assessment tax return once a year
- You’ll include your total income for that tax year (6 April to 5 April) and the cost of certain business expenses – like fuel and phone bills
- If you do your tax return online, you’ll then see how much tax you owe for that tax year
You can find out more about doing this type of tax return on our Self Assessment page.
Making Tax Digital for Income Tax
If you’re a sole trader or make money from property, the way you send us information about your income is changing. It’s called Making Tax Digital for Income Tax. For some people, that change starts from April 2026.
Making Tax Digital for Income Tax works differently to Self Assessment. You should check if the different rules apply to you. Find out if you need to use it, when to start, and how you can get ready for it on our Making Tax Digital for Income Tax page.
Find all the help you’ll need
Ready to take the next step? Great. We’ll take you through everything – from registering with us, to understanding your first tax return. Find out more here on GOV.UK.