What Taxes Do I Need To Pay?

As a freelancer you pay income tax and National Insurance Contributions on your income after deductions for expenses. Once expenses are subtracted from your income, you pay income tax on the amount remaining..

Info About Income Tax

The standard Personal Allowance is £12,570, which is the amount of income you do not have to pay tax on. Your Personal Allowance may be bigger if you claim Marriage Allowance or Blind Person’s Allowance. It’s smaller if your income is over £100,000. For income in 2025/2026 above this threshold, you will be taxed at the following levels:

• The Basic Income Tax rate of 20% on income between £12,571 to £50,270

• The Higher Income Tax rate of 40% on income between £50,271 and £125,140

• The Additional Income Tax rate of 45% on income over £125,140.

As a freelancer, you pay Income Tax through Self Assessment. HMRC must receive your tax return and any money you owe before 31 January in the year after your tax year. For example: the tax year starts on 6 April 2023 and ends on 5 April 2024. You will need to pay your tax return before 31 January 2025. Make sure to also register for Self Assessment before the 5th of October 2024 to avoid penalties.

In addition to income tax, you will also need to make National Insurance Contributions (NICs). The amount you have to pay depends on the level of your earnings. There are currently two types of NICs freelancers have to pay. There are Class 2 NICs – which are £3.05 per week – if your income (profits) is above £6,725 (2023/24 Tax Year) – and Class 4 NICs. HMRC will work out the amount of Class 4 NICs you are liable for during the annual self assessment process. Your liability is based on the amount of profit your business makes; 9% on your earnings between £9,568 and £50,270, and 2% on any income (profits) above this.

Finally, if your business has a turnover of more than £90,000 (for the year from April 2021) over a 12-month period, you must also register your business for Value Added Tax (VAT). When you are VAT-registered, you will need to tell us you VAT number immediately so we can make sure your invoices are correct.