Mastering your tax bill
Whether you’re a freelancer, sole trader, or running a creative business, navigating tax and accessing financial support can feel overwhelming.
This page offers clear, up-to-date guidance to help you plan smarter, claim what you’re entitled to, and stay in control. Discover the secrets to mastering your tax bills with our comprehensive guide.
Register as self-employed with HMRC
One of the first steps in tax planning for self-employed people is registering with HMRC. This is a legal requirement if you earn income through self-employment, and it will ensure that you pay the correct amount of tax and national insurance.
Important: Failure to register as self-employed can result in fines and penalties so it is important that you understand your tax obligations:
You should be aware of the minimum level of profits to qualify for a national insurance contribution, which for the current tax year is £6,500 for the year 2025/26 tax year. For more information, click here.
You should also be aware of the personal allowance - this is the amount of income you can earn without paying tax. For the current tax year (2025/26), this is £12,570. This is the amount of income you can earn without paying any tax. Any income earned above this amount will be subject to income tax.
If you are operating a limited company, you should be aware of the dividend allowance, which is the amount of dividends you can receive tax-free.
The dividend allowance for the 2025/26 tax year remains £500. Any dividends received above this amount will be subject to income tax. This depends on the level of profits as a sole trader, compared to the way corporation tax, dividend tax and PAYE taxes work when running a limited company.
Setting aside money for taxes
If you’re not an employee, you are responsible for paying your own taxes, so you need to make sure you have enough money to cover your tax bill when it’s due.
An excellent way to do this is to set aside a percentage of your income monthly to cover your tax bill or to arrange with the HMRC to pay towards your tax bill weekly or monthly.
This is crucial for tax planning. It's important to keep track of all your income and expenses, including receipts and invoices, so you can claim back any tax-deductible expenses. This will help you reduce your tax bill and ensure that you are only paying the tax legally required.
Filing your self-assessment late can result in penalties and fines. The deadline for filing your tax return is 31st January, so ensure you have everything in order well before this date.
Making Tax Digital is a large HMRC project to move all tax reporting to software and apps. The next stage to be introduced is Making Tax Digital for Income Tax Self-assessment.
Learn more about Making Tax Digital with our helpful guide.
Sole trader vs limited company – what’s more tax efficient?
Running a limited company can be more tax efficient than running a sole trader business. Find out more here
Financial support you could be missing
If you’re working as a freelancer, you’re entitled to claim tax relief on certain expenses that are incurred as part of your business. These expenses can include things like office costs, travel expenses, and training costs.
Additionally, there is a trading allowance of £1,000 a year, which allows you to earn a small amount of money from trading or property rental without having to register as self-employed or pay tax on it.
If you work from home as a freelancer, you may be eligible for relief on your home office expenses. This can include a proportion of your utility bills, internet costs, and other expenses related to working from home.
If your business has a turnover of less than £150,000 per year, you may be eligible to register for the flat rate VAT scheme. Under this scheme, you will pay a flat rate of VAT on your sales instead of the standard rate. This can be beneficial for freelancers as it can reduce the amount of VAT you have to pay.
If you are selling a business or business assets, you may be eligible for entrepreneurs’ relief or business asset disposal relief. These reliefs can reduce the amount of capital gains tax that you have to pay on the sale.
If you are starting a new business or setting up as a freelancer, you may be eligible for a start-up loan. The government provides these loans and can be used to help cover the costs of starting a business, such as buying equipment or renting office space.
If you are involved in research and development as a freelancer, you may be eligible for specific tax relief. This can reduce your corporation tax bill or increase your payable tax credit.
If you are on a low income you may be eligible for universal credit or other benefits. These benefits can provide financial support to help cover the costs of living and working and may also open up other forms of financial support.
There are other benefits available such as the Creative Industries' Tax Relief and the Film Tax Relief, which may apply to those working in the film and TV industry. Those struggling with sickness or who are Disabled can also access support.
Use our confidential Benefits Calculator to check which benefits you may be eligible for. This simple tool helps you navigate the system and understand the financial support available to you.
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*with thanks to Mark Woodruff FPFS – chartered financial planner and qualified actuary – who supported the creation of this article.