If you are widely referred to as a freelancer, it’s likely you are a sole trader. It means that you can keep all your business’s profits after tax, but also that you are responsible for the debt or financial responsibilities of your company.
You will need to tell HMRC that you are a sole trader so that you can be taxed correctly. You will pay your yearly tax return through HMRC’s Self Assessment.
Find out more here.
When do I need to set up as a sole trader?
According to GOV.UK, you need to set up as a sole trader if any of the following apply:
- You earned more than £1,000 from self-employment between 6 April two years ago and 5 April last year
- You need to prove you’re self-employed, for example to claim tax-free childcare
- You want to make voluntary Class 2 National Insurance payments to help you qualify for benefits
Find out more here.
Further support with setting up as a sole trader
IPSE is running an incubator programme to support those who are new to self-employment. This 12-month programme covers everything from setting up, networking, and mental health as a freelancer. For more information, contact one of the membership team.
There is a ‘Set up as a sole trader’ step-by-step plan on GOV.UK, which you can do here.
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