What is a Self Assessment Tax Return? UK Freelancer's Guide

Understanding the UK's Tax System as a Freelancer

Let's start with the basics. HMRC expects every UK taxpayer to pay their fair share, but they recognise that freelancers and self-employed people have different circumstances compared to traditional employees. That's where self-assessment comes in.

As a freelancer, you're essentially running your own business, even if it's just you working from your kitchen table. This means you have income that isn't automatically taxed at source, and you likely have business expenses that can reduce your tax bill. HMRC needs to know about both sides of this equation.

Who needs to complete a self assessment tax return? The answer isn't always straightforward, but here are the main scenarios:

• You're self-employed and earned more than £1,000 in the tax year

• Your total income from all sources exceeds £100,000

• You have untaxed income over £2,500 (like rental income or dividends)

• You're a company director

• You need to claim certain tax reliefs or allowances

For most freelancers, that first point is the key one. If you've made more than £1,000 from your freelance work in a tax year, you'll need to register for self assessment.

HMRC's role in all this is pretty straightforward , they want to collect the right amount of tax at the right time. They're not trying to catch you out (despite what some people think), but they do expect accuracy and punctuality. Miss a deadline or make significant errors, and you'll face penalties that can quickly add up.

Decoding Self Assessment: What It Means for Freelancers

Self assessment is exactly what it sounds like, you assess your own tax situation and tell HMRC about it. It's a system that puts the responsibility on you to calculate and report your income, expenses, and tax liability.

The purpose is simple: HMRC needs to know how much tax you owe so they can collect it. For employees, this happens automatically through payroll. For freelancers, it happens through self assessment.

Here's who definitely needs to file a self assessment return:

• Anyone who's self-employed, regardless of how much they earn (though there's a £1,000 trading allowance that might help very small earners)

• People with multiple income sources

• Higher-rate taxpayers who want to claim tax relief on pension contributions

• Anyone who's received a notice from HMRC asking them to complete a return

One of the biggest misconceptions about self assessment is that it's only for people who owe tax. That's not true. Even if you don't owe any tax , perhaps because your income was below the personal allowance, or your expenses were particularly high , you might still need to file a return.

Another common myth is that self-assessment is incredibly complicated and requires an accountant. While professional help can certainly be valuable (and we'd love to help you at Virtue Accountants!), many freelancers successfully complete their own returns using HMRC's online system.

How to Register for Self-Assessment: 4 Easy Steps

Before you can file your first self-assessment return, you need to register with HMRC. This is a separate process from actually completing your return, and it's something you need to do as soon as you start freelancing.

Step 1: Determine if you need to register: If you've started freelancing and expect to earn more than £1,000 in the tax year, you need to register. Don't wait to see how much you actually earn, if there's a reasonable chance you'll cross that threshold, register early.

Step 2: Gather your information: You'll need your National Insurance number, a contact address, and details about when you started freelancing. If you have any other sources of income, have that information ready too.

Step 3: Register online: Head to the HMRC website and look for the "Register for self assessment" section. The online process is straightforward and usually takes about 10-15 minutes. You can also register by phone if you prefer.

Step 4: Wait for your UTR: After registering, HMRC will send you a Unique Taxpayer Reference (UTR) by post. This 10-digit number is your key to accessing your online tax account, so keep it safe.

The registration process itself is free, but timing matters. You need to register by 5 October following the end of the tax year in which you started freelancing. Miss this self assessment tax return deadline, and you'll face an automatic £100 penalty.

Key Deadlines Every Freelancer Must Know

Tax deadlines in the UK follow a specific pattern, and missing them can be expensive. Here's what you need to know:

The tax year runs from 6 April to 5 April the following year. This might seem like an odd timeframe, but it's been this way for centuries (there's actually a fascinating historical reason involving calendar changes, but that's a story for another day).

Registration deadline: 5 October. If you started freelancing during the tax year that ended on 5 April, you have until 5 October to register for self assessment.

Paper return deadline: 31 October. If you're filing a paper return (which is increasingly rare), it needs to reach HMRC by 31 October following the end of the tax year.

Online return and payment deadline: 31 January. This is the big one. Your online self assessment return must be submitted, and any tax owed must be paid, by 31 January following the end of the tax year.

Let's put this in context with an example. Say you started freelancing in June 2023. The tax year ended on 5 April 2024, so you'd need to register by 5 October 2024, and submit your return (covering June 2023 to April 2024) by 31 January 2025.

How to File Self Assessment Tax Return: Needed Documents

Before you sit down to complete your self assessment return, you need to gather all the relevant information. Think of this as collecting evidence for your financial story over the past year.

Income records are your starting point. You'll need details of everything you've earned from freelancing. This includes:

• Invoices you've sent to clients

• Bank statements showing payments received

• Records of any cash payments (yes, these count too)

• Details of any other income, like interest from savings or rental income

Don't just rely on your bank statements, though. Sometimes payments can be delayed, so an invoice dated in March might not show up in your bank account until April. For tax purposes, it's usually when you invoice (or when payment becomes due) that matters, not when you actually receive the money.

Expense tracking is where you can really save money. Every legitimate business expense reduces your taxable income, which means less tax to pay. You'll need receipts and records for:

• Office supplies and equipment

• Professional subscriptions and memberships

• Training and development costs

• Marketing and advertising expenses

• Travel costs for business purposes

• A portion of your home costs if you work from home

Your UTR is the key that unlocks your HMRC online account. Without it, you can't access the self assessment system. If you've lost your UTR, you can find it on previous tax returns, or contact HMRC to get a replacement.

Filing Your Self Assessment Tax Return Online

HMRC's online system has come a long way in recent years. It's actually quite user-friendly, with built-in calculators and helpful prompts along the way.

To get started, you'll need to set up your HMRC online account if you haven't already. You'll need your UTR, National Insurance number, and some personal details. HMRC will then send you an activation code by post, which can take up to 10 days to arrive.

The main form you'll be completing is called SA100. This covers your basic personal and financial information. Depending on your circumstances, you might also need to complete supplementary pages. For most freelancers, this will be the SE pages (Self-Employment), but you might also need pages for other types of income.

The online system guides you through each section, asking questions in plain English rather than tax jargon. It automatically calculates your tax liability as you go, so you'll know exactly how much you owe (or if you're due a refund) before you submit.

Calculating Your Tax Liability

This is where things get a bit more technical, but don't worry , the online system does most of the heavy lifting for you.

Income Tax is charged on your profits (income minus allowable expenses) above the personal allowance. For the 2023-24 tax year, the personal allowance is £12,570, meaning you don't pay Income Tax on the first £12,570 you earn.

Above that, you'll pay:

• 20% on income between £12,571 and £50,270 (basic rate)

• 40% on income between £50,271 and £125,140 (higher rate)

• 45% on income above £125,140 (additional rate)

National Insurance Contributions are separate from Income Tax. As a freelancer, you'll pay:

• Class 2 NICs: A flat rate of £3.45 per week if your profits are above £6,515

• Class 4 NICs: 9% on profits between £12,570 and £50,270, then 2% above that

Payments on Account can catch new freelancers off guard. If you owe more than £1,000 in tax, HMRC will ask you to make payments on account for the following year. These are advance payments based on your current year's tax bill, split into two instalments due on 31 January and 31 July.

Claiming Expenses: What You Can Deduct

This is often the most valuable part of self assessment for freelancers. Every pound you can legitimately claim as a business expense is a pound that isn't subject to tax.

Office and home office expenses are often the biggest category for freelancers. If you work from home, you can claim a portion of your household costs like heating, lighting, and council tax. HMRC offers a simplified method where you can claim £6 per week for up to 25 hours of home working, or £18 per week for 51+ hours.

Travel costs can add up quickly, but the rules are specific. You can claim for business travel, but not for your normal commute to a regular workplace. If you're a freelancer who works from home and travels to client meetings, those journeys usually count as business travel.

Professional fees and subscriptions are straightforward , things like professional body memberships, trade magazine subscriptions, and industry conference fees.

Marketing and advertising expenses include website costs, business cards, networking event fees, and any advertising you pay for to promote your services.

The key rule for all expenses is that they must be "wholly and exclusively" for business purposes. A laptop used only for work? Fully deductible. A laptop used for both work and personal use? You can only claim the business portion.

Avoiding Common Pitfalls and Penalties

HMRC's penalty system is designed to encourage compliance, but it can be harsh if you're not careful.

Late filing penalties start at £100 if your return is even one day late. This increases to £200 after three months, then £300 or 5% of your tax liability (whichever is higher) after six months. Leave it a full year, and you could face penalties of £1,600 or more.

Late payment penalties are separate from late filing penalties. You'll pay 5% of the unpaid tax if you're 30 days late, another 5% at six months, and another 5% at 12 months. Plus, you'll pay interest on the outstanding amount.

Interest on unpaid tax is charged from the day after the payment deadline. The rate changes periodically, but it's usually higher than you'd get from a savings account.

If you make an error on your return, don't panic. HMRC understands that mistakes happen, especially for new freelancers. You can amend your return online for up to 12 months after the filing deadline. For more significant errors or older returns, you might need to write to HMRC.

How Virtue Accountants Simplify Your Self Assessment

While self assessment isn't impossibly difficult, it can be time-consuming and stressful , especially when you'd rather be focusing on your freelance work. That's where we come in.

At Virtue Accountants, we handle self-assessment returns for freelancers across the UK. We don't just fill in the forms; we make sure you're claiming every allowable expense and taking advantage of every available tax relief. Our team stays up-to-date with the latest tax rules and regulations, so you don't have to.

We also provide year-round support, not just at tax return time. Our clients can submit expenses through our mobile app throughout the year, making the whole process much smoother when it comes to filing time.

Our online accounting services for freelancers start from only £29.50 per month for freelancers, and we never tie you into long-term contracts. We believe in earning your business through great service, not through legal obligations.

Final Thoughts

Self-assessment for tax return doesn't have to be the scary monster that many freelancers think it is. Yes, it requires some organisation and attention to detail, but it's also an opportunity to really understand your business finances and make sure you're not paying more tax than necessary.

The key is to start early, keep good records throughout the year, and don't be afraid to ask for help when you need it. Whether you choose to handle your self-assessment yourself or work with an accountant like us, the most important thing is to meet those deadlines and be accurate with your information.

If you're feeling overwhelmed or just want someone to handle the technical stuff while you focus on what you do best, we're here to help. After all, your time is probably better spent serving your clients than wrestling with tax forms, and that's exactly why services like ours exist.