How to Register as a Freelancer in the UK (Step-by-Step Guide)
Are you starting out as a freelancer in the UK? Here's your easy-to-follow guide on how to officially register your freelance business, ensuring you're compliant from the get-go.
Step 1: Decide Your Business Structure
Firstly, choose between operating as a sole trader or forming a limited company.
- Sole Trader: Simpler, lower costs, suitable for individuals starting out.
- Limited Company: Offers limited liability protection, separate legal entity, potentially more tax-efficient but involves greater responsibilities.
Most freelancers initially register as sole traders due to simplicity and lower costs.
Step 2: Register with HMRC
As a sole trader, you'll need to:
- Register online through the HMRC website within 3 months of starting your freelance business.
- You'll receive a Unique Taxpayer Reference (UTR) number, essential for your tax return.
Step 3: Set Up a Separate Bank Account
While not mandatory for sole traders, opening a dedicated business bank account simplifies bookkeeping and tax reporting.
Step 4: Understand Your Tax Obligations
As a freelancer, you'll typically:
- File an annual Self Assessment tax return.
- Pay Income Tax and National Insurance Contributions (NICs).
- Keep accurate records of income and expenses for at least 5 years.
Step 5: Register for VAT (if applicable)
If your turnover exceeds £85,000 annually, you must register for VAT. Even below this threshold, voluntary registration might benefit your business by reclaiming VAT on expenses.
Step 6: Get Business Insurance
Depending on your freelance profession, consider policies such as:
- Professional indemnity insurance
- Public liability insurance
- Equipment cover
Step 7: Keep Accurate Financial Records
Maintain thorough records of invoices, receipts, and expenses. Consider using bookkeeping software like Xero, QuickBooks, or Taxo, an AI-driven accounting tool designed specifically for freelancers.
Detailed Registration Process
HMRC Registration Steps:
- Go to GOV.UK and search for "register for Self Assessment"
- Complete the online form with your personal details
- Provide your National Insurance number and employment details
- Choose your business start date (when you first earned money freelancing)
- (sole trader for most freelancers)