How to Start a Freelance Business in the UK

Making the Leap into Freelancing

Going freelance is one of the most exciting — and slightly terrifying — career moves you can make. No more fixed salary, no more asking permission to take a Wednesday off, and no more someone else deciding what your time is worth.

But with that freedom comes responsibility. You need to find clients, send invoices, track expenses, and pay the right amount of tax. None of it is particularly complicated, but getting it wrong can be expensive.

This guide covers everything you need to know about starting a freelance business in the UK.

Freelance vs Self-Employed vs Sole Trader: What's the Difference?

This confuses almost everyone, so let's clear it up.

• Self-employed is your tax status. It means you work for yourself rather than being employed by someone else.
• Sole trader is your business structure. It's the simplest way to be self-employed — you and your business are legally the same entity. No Companies House registration required.
• Freelancer is just a way of describing what you do — selling your skills to multiple clients on a project basis.

Most freelancers operate as sole traders. It's the default, the simplest, and the cheapest to set up. You might consider a limited company later — but for now, sole trader is almost certainly the right choice.

Registering with HMRC

You must register as self-employed with HMRC. The deadline is 5 October following the end of the tax year in which you first started freelancing (tax years run 6 April to 5 April).

Our strong advice: register immediately. It takes ten minutes, it's free, and you'll get your UTR (Unique Taxpayer Reference) number within a couple of weeks.

You should also be aware of Making Tax Digital requirements. Depending on your income, you may need to submit quarterly updates to HMRC digitally. Our guide to the MTD threshold explains who's affected and when.

Setting Your Rates

Pricing is where most new freelancers get it wrong — almost always by charging too little.

Work out what you'd want to earn annually, then divide by the number of billable hours you'll realistically work. Not every hour is billable — you'll spend time on admin, marketing, invoicing, and enquiries that don't convert. A realistic estimate is 60–70% billable time.

Then add your costs: National Insurance, income tax, pension contributions (nobody is doing this for you anymore), software, equipment, holiday pay, and a sick pay buffer.

As a rough rule, your day rate should be about double what you'd earn per day in an equivalent employed role. Don't apologise for charging what you're worth.

Contracts and IR35 Awareness

Always Use a Contract

Even for small projects. A contract protects both you and your client by setting clear expectations about scope, payment terms, deadlines, and what happens when things change.

Your contract should cover: scope of work, payment terms (14 days is reasonable, with a portion upfront for large projects), revision limits, intellectual property ownership, and cancellation terms.

IR35: What You Need to Know

IR35 is tax legislation designed to identify freelancers who are effectively working as employees. If HMRC determines your arrangement looks more like employment than freelancing, you could owe additional tax and National Insurance.

Key factors that suggest you're outside IR35 (which is what you want):

• You can send a substitute to do the work
• You control how and when you work
• You're not financially dependent on a single client
• You provide your own equipment
• You bear financial risk

This is one area where professional advice is genuinely worthwhile — see our post on whether you need an accountant.

Invoicing Basics

Getting paid starts with sending proper invoices. An invoice should include your name and address, your UTR or VAT number (if registered), the client's details, a unique invoice number, the date and payment due date, a clear description of the work, the amount due, and your bank details.

For a deeper dive, read our guide on how to invoice as a sole trader.

Tip: Set your payment terms and stick to them. Chase late invoices promptly — the longer you leave it, the harder it becomes.

Allowable Expenses for Freelancers

Every legitimate business expense reduces your taxable profit. Here are the most common — and our complete expenses list covers everything:

• Computer and equipment — laptop, monitor, desk, chair
• Software subscriptions — design tools, project management, cloud storage
• Phone and internet — the business-use proportion
• Home office costs — a proportion of rent/mortgage interest, utilities, council tax. See our working from home tax relief guide.
• Travel — trains, mileage for client meetings (not your commute to a co-working space)
• Professional development — courses, books, conferences related to your work
• Marketing — website hosting, portfolio tools, advertising
• Accountancy and bookkeeping — including Accounted

Keep receipts for everything. A photo on your phone works — or better yet, WhatsApp it straight to your bookkeeping app so it's filed immediately.

Managing Irregular Income and Tax Payments

Set Aside Tax Money Immediately

Every time a client pays you, move 25–30% into a separate savings account for tax and National Insurance. Not at the end of the month. Immediately. This single habit prevents most sole trader tax stress. For more strategies, see our guide on reducing your tax bill.

Understand Payments on Account

After your first year, HMRC will likely ask you to make payments on account — advance payments towards next year's tax bill, due on 31 January and 31 July. A great year can mean uncomfortably large advance payments the following year.

Build a Runway

Aim for at least three months of essential expenses in savings before you go freelance. Six months is better. This buffer gives you the confidence to be selective about clients.

Track Your Cash Flow

Know what's coming in, what's going out, and when. Late-paying clients can create cash flow crunches even when your business is profitable on paper.

Tools Every Freelancer Needs

You don't need much to start freelancing, but these tools pay for themselves:

• Bookkeeping software — Accounted handles your transactions, receipts, expenses, and tax calculations. Penny, our AI bookkeeper, categorises everything via WhatsApp.
• Invoicing — send professional invoices and track payments
• Contract templates — reusable templates save time on proposals
• Time tracking — essential if you bill hourly
• A separate bank account — not legally required, but it makes bookkeeping infinitely easier

Accounted connects to your bank, reads your receipts, categorises your expenses, and keeps you MTD-compliant — all from WhatsApp. No spreadsheets. No desktop app you forget to open.

Don't miss the key tax deadlines for your first year — getting caught out by a deadline you didn't know about is an expensive mistake.

Ready to simplify your bookkeeping? Try Accounted free for 14 days →

Related Reading

• Payroll for Small Businesses: A Complete UK Guide
• Tax Guide for Freelance Web Developers and Designers

You may also find our Construction Subcontractor Insurance Guide helpful.

You may also find our Tax Guide for Private Tutors and Music Teachers helpful.

You may also find our Tax Guide for Uber and Deliveroo Drivers helpful.

Related reading: Business Rates Relief: What Small Businesses Can Claim.

For more on this topic, read Corporation Tax for Small Businesses: Rates, Reliefs, and Filing.

For more on this topic, read Non-Resident Landlord Scheme: UK Property Tax from Abroad.

You may also find our Tax Guide for Caterers and Event Food Businesses helpful.

You may also find our Tax Guide for Childminders: Tax-Free Income and Expenses helpful.

You may also find our Tax Guide for Personal Trainers and Fitness Instructors helpful.

You may also find our Tax Guide for Plumbers: What You Can Claim in 2025/26 helpful.

You may also find our What is VAT and Do I Need to Register? Simple Guide helpful.

View our pricing and start your free 30-day trial today.

Accounted is built for UK sole traders — bookkeeping, tax, and MTD compliance in one place. See how it works →