If you’re just starting out as a freelancer, then you may be thinking about managing your own taxes for the first time.
In this post we’ll explain certain tax thresholds for freelancers, including the amount you can earn before paying tax. We’ll also discuss some other steps you’ll need to take if you’re starting a freelance business.
How Much Can You Earn Freelance Before Paying Tax?
All UK workers have a tax-free Personal Allowance. This is the amount of income you’re allowed to earn before you pay any tax. At the time of writing, the standard Personal Allowance is £12,570. So this is the amount you can earn from all of your sources of income before paying tax, including your freelance work, your property and investments, and any other employment.
You may get a larger Personal Allowance if you claim Marriage Allowance, or if you claim Blind Person’s Allowance. Also, you may have a smaller Personal Allowance if your annual income is over £100,000.
You can read the most up-to-date government guidance on Personal Allowances.
Tax Thresholds for Freelancers
Though you don’t have to pay any tax on anything you make up to your Personal Allowance, there’s still an important tax threshold to bear in mind as a freelancer.
If you make over £1,000 in a tax year as a freelancer, then you have to submit a self-assessment tax return to HMRC. The tax year runs from 6 April to 5 April.
So even if your total freelance income is less than £12,570, if you earn anything greater than £1,000, you’ll still have to submit a tax return. You may not have to pay any tax if you’re below your Personal Allowance. But HMRC will still need to see a record of your earnings.
National Insurance Contributions for Freelancers
As well as income tax, freelancers are also potentially liable to pay Class 2 and Class 4 National Insurance Contributions. Once again, your contributions are based on how much you earn. At the time of writing, you’ll have to pay Class 2 contributions on anything you earn over £6,725. Meanwhile, you’ll have to pay Class 4 contributions on anything you earn over £11,908.
VAT For Freelancers
Finally, if you earn more than £85,000 freelancing in a tax year, you’ll have to register for VAT.
Read our full guide to VAT for freelancers.
Setting Up As a Freelancer For The First Time – What You’ll Need
You’ll find many guides on our site to help you through your early days as a freelancer:
- Going Freelance For The First Time – A Step-By-Step Guide To What You’ll Need.
- When And How Do I Register My Freelance Business?
- Freelance Invoice Templates.
- Completing Your First Self-Assessment Tax Return.
- A Guide To Record-Keeping For Freelancers.
- How To Get Paying Clients As a Freelancer.
You’ll also need certain types of insurance to cover you for the risks you might face as a freelancer. Read our full guide to the types of insurance for the self-employed.
At Tapoly, we specialise in giving all types of freelancers tailored insurance cover at an affordable price. You won’t pay for any cover you don’t need, and there are no hidden fees. Get in touch for a free quote in minutes.
If you have any questions or would like to discuss your options, please contact the Tapoly team at firstname.lastname@example.org, call our helpline on +44(0)2078 460 108 or try the chat system on our website.