Online Tax Returns as a Freelancer (UK Self-Assessment)

freelance tax return help in the UK

The UK Self assessment can be daunting but worry not. This guide will bring clarity to your online tax returns as a freelancer.

Do freelancers pay taxes?

Freelancers are classed as self-employed, therefore they have to pay taxes like every other self-employed business person. Within the UK, if your income isn’t taxed at source by your employer, then it must be declared via completing a self-assessment tax return.

Being employed by a company in the UK generally equates to being paid through the pay as you earn (PAYE) scheme. This means that your employer is responsible for handling your tax and declaration of earnings.

If you are living in a foreign country such as Thailand or Bali for over a certain period of time, you may not need to pay UK tax. It would be worth seeking legal advice or speak to an accountant.

How do I declare my tax earnings?

You must register with HMRC as self-employed and complete a self-assessment tax return.

When is the UK tax year?

6th April 2020–5th April is the current tax year at the time of writing this article.

When should I register for UK self-assesment?

It is requested that you register before October, after the end of the tax year. So to make it simple –  If you start freelancing online after April 2020, then you should register with HMRC by October 2021.

When should I submit the online tax form after registering?

Your online self-assessment form deadline is the following January. If you start freelancing in April 2020, then you get your form submitted by January 2021.

How do I Registering with HMRC?

After registering, HMRC will give you all the information you need to log in to your HMRC self-assessment account. You will also receive a Unique Taxpayer Reference (UTR). You could then decide to contact and register an accountant to complete your return for you – but to be honest, it’s straightforward, as long as you keep good records and all your receipts!

Quickbooks is a great business accounting software for small to mid-size business owners. An accountant is useful for ascertaining what to claim if your tax-deductible expenses and situation is more complicated.

Should I keep records and tax deductible expenses?

Yes! Spending a few hours once a month to log all income, is well worth the time and energy. When working remotely you may get paid in different currencies; Remember to convert it to pounds.

What Counts as Tax Deductible Expenses?

As a general rule, you’re only allowed to claim 100% of the cost for items or services you’ve bought ‘wholly and exclusively in relation to your job. HMRC will allow you to claim a range of expenses pertaining to office supplies, including:

  • Your desk phone
  • Your mobile phone
  • Postage costs
  • Business stationery
  • Printing costs
  • Printer ink and cartridges
  • Any computer software that your business uses for less than two years
  • Any computer software your business uses and makes regular payments to renew the licence

Should you purchased a family computer that you’re only using for business 50% of the time, you can only claim the cost of that computer as a business expense on a pro-rata basis which is 50%. This is where an accountant comes in handy as they can tell you from your records, logs and sheets what you can claim for.

Online tax returns as a freelancer

How Much Tax Will I Have To Pay?

To work out how much you’ll owe, follow this formula:

Total income – deductible expense = Profit

Now if your profit is below the personal allowance of £12,500 then you won’t have to pay a penny. If the profit is above this then you will pay a basic rate of 20%.

Personal AllowanceUp to £12,5000%
Basic rate£12,501 to £50,00020%
Higher rate£50,001 to £150,00040%
Additional rateover £150,00045%
Correct as of January 2021

Do I have to pay national insurance contributions?

These contributions are due when your income exceeds £6,205 within the year. These are voluntary payments but your contribution amounts dictate whether you eventually receive your pension.

This information may have changed since writing. For more information on filing online tax returns as a freelancer, visit the HMRC website.