Fashion Designers — Freelance and Small Business Tax Guide

The Accounted Business Team·1 March 2026·7 min read

Fashion design is a world of creativity, deadlines, and beautiful chaos. What it shouldn't be is a source of tax confusion. Whether you're freelancing for fashion houses, running your own label, selling through your website, or building a brand from your spare bedroom, the tax rules are the same — and they're more straightforward than you might think.

This guide covers everything self-employed fashion designers and small fashion business owners need to know about UK tax for the 2025/26 tax year. From registering with HMRC to claiming fabric as a business expense, we've got you covered.

Getting Registered

If you're earning money from fashion design — whether through freelance commissions, selling your own designs, or consulting for brands — you need to register as self-employed with HMRC. Do this within three months of starting to trade.

Once registered, you'll file a Self Assessment tax return each year covering the period from 6 April to 5 April. The online filing deadline is 31 January after the end of the tax year.

Sole Trader or Limited Company?

Most fashion designers start as sole traders because it's simpler. You can always incorporate later if it makes financial sense. Generally, once your profits consistently exceed £30,000-40,000, it's worth looking at the numbers. Our guide on sole trader vs limited company breaks down the pros and cons.

How Much Tax Will You Pay?

You'll pay tax on your profit — total income minus allowable expenses. Here are the key figures:

Income Tax for 2025/26

Personal allowance: £12,570 tax-free
Basic rate: 20% on profits between £12,571 and £50,270
Higher rate: 40% on profits above £50,270

National Insurance

Class 2 NI: £3.45 per week (£179.40 per year)
Class 4 NI: 6% on profits between £12,570 and £50,270

As an example, if you earn £45,000 from your fashion business and have £12,000 in expenses, your taxable profit is £33,000. Your income tax would be around £4,086, plus Class 4 NI of approximately £1,226 and Class 2 NI of £179.40 — totalling roughly £5,491.

For a personalised estimate, check our guide on how much tax sole traders pay.

Allowable Expenses for Fashion Designers

Fashion design comes with a rich variety of expenses. Claiming them properly can make a significant difference to your tax bill.

Materials and Fabrics

Fabric, textiles, and leather
Thread, zips, buttons, and fastenings
Lining materials
Interfacing and wadding
Embellishments (beads, sequins, embroidery threads)
Dye and printing supplies
Pattern paper and card

If you buy materials in bulk, you can claim the cost when you purchase them (under cash basis accounting), even if you don't use them all immediately.

Equipment and Machinery

Sewing machines (domestic and industrial)
Overlockers
Cutting tables and tools
Mannequins and dress forms
Steam irons and pressing equipment
Pattern drafting tools
Fabric scissors and rotary cutters

For items costing over £1,000, you may need to claim them as capital allowances through the Annual Investment Allowance rather than as a straightforward expense. The AIA threshold is generous though — up to £1,000,000 per year — so this is more about how you record the expense than whether you can claim it.

Studio and Workspace

If you rent a studio, workshop, or shared workspace:

Rent and service charges
Business rates
Utility bills
Insurance
Repairs and maintenance

If you work from home, you can claim a proportion of your household costs. The simplified flat rate method gives you £10-£26 per month depending on hours worked, or you can calculate the actual business proportion of your bills. Our work from home expenses guide explains both options.

Technology and Software

Computer or laptop
Design software (Adobe Creative Suite, CLO 3D, Optitex)
Pattern-making software
Photography equipment for lookbooks
Printer and scanner
Website hosting and e-commerce platform fees (Shopify, Squarespace, WooCommerce)

Marketing and Brand Building

Photography and videography for campaigns
Model hire
Hair and makeup artists for shoots
Lookbook printing
Trade show booth fees (London Fashion Week, Pure London, etc.)
Social media advertising
PR agency fees
Sample postage to press and buyers

Travel

Travel to fabric suppliers, trade shows, and client meetings
Mileage at 45p per mile for the first 10,000 business miles, then 25p
Flights and hotels for trade shows (including international ones)
Courier and postage costs for sending samples and orders

Our mileage guide covers the details of claiming travel expenses.

Professional Services and Training

Accountancy and bookkeeping fees
Legal costs (trademarks, contracts, intellectual property)
Pattern-cutting courses and CPD
Industry memberships (British Fashion Council, etc.)
Professional indemnity insurance
Product liability insurance

For the full list, see our complete guide to sole trader expenses.

Stock and Inventory

If you're making and selling garments, managing your stock properly is important for your accounts. Under the cash basis of accounting (which most sole traders use), you claim the cost of materials when you buy them. But if you have significant stock at year end, you should still keep track of it — HMRC may ask about it, and it matters if you ever switch to accrual accounting.

For designers selling through their own website or shops, keep records of:

Stock purchased and cost price
Stock sold and selling price
Stock remaining at year end

Our cash basis vs accrual accounting guide explains the difference between the two methods.

VAT for Fashion Businesses

The VAT registration threshold is £90,000 in taxable turnover over a rolling 12-month period. If you're selling products (not just providing design services), your turnover can climb quickly.

When to Register

You must register for VAT if:

Your taxable turnover exceeds £90,000 in any 12-month period
You expect to exceed £90,000 in the next 30 days alone

Voluntary Registration

Even below the threshold, voluntary registration can make sense for fashion businesses, because:

You can reclaim VAT on fabric, equipment, and other purchases
It can make your brand look more established to wholesale buyers
If most of your customers are VAT-registered businesses, they can reclaim the VAT you charge

The downside is more paperwork and, if you sell to consumers, your prices effectively increase by 20%. Our VAT registration guide helps you weigh the decision.

Selling Internationally

Fashion is an international business, and selling to customers outside the UK has specific tax implications.

Selling to EU Customers

Since Brexit, selling goods to EU customers means dealing with customs declarations, potential duties, and VAT on imports in the destination country. For small businesses, this can be complex. Make sure you understand the rules in each country you sell to — or use a fulfilment service that handles it for you.

Selling to Non-EU Customers

Exports outside the EU are generally zero-rated for VAT purposes, meaning you don't charge VAT but can still reclaim VAT on your inputs.

Intellectual Property and Tax

As a fashion designer, your designs have value. While you can't formally copyright a dress design in the UK (fashion has limited IP protection), there are some tax considerations around intellectual property:

Trademarks: The cost of registering and maintaining trademarks is an allowable expense.
Design rights: Registration costs for registered designs are deductible.
Legal fees: Costs for protecting your IP (cease and desist letters, legal advice) are business expenses.

Record-Keeping

Fashion businesses often involve a lot of transactions — fabric purchases, online sales, market stall takings, wholesale orders. Keeping on top of it all is essential.

Using bookkeeping software like Accounted makes this much more manageable. Penny can categorise your transactions automatically — so when you buy £200 of fabric from a supplier, it's logged and categorised without you having to think about it.

Key records to maintain:

All sales invoices and receipts
Purchase receipts for materials and supplies
Bank statements
Stock records
Mileage log for business travel

Planning for Growth

As your fashion business grows, consider:

Incorporating: Moving to a limited company structure can be tax-efficient once profits are consistently high. You'll pay corporation tax instead of income tax, and can take a mix of salary and dividends.
Hiring: Taking on staff (a seamstress, a pattern cutter, an assistant) means becoming an employer with PAYE obligations.
Studio space: Moving from home to a dedicated studio is a big step but opens up possibilities. The rent is fully deductible.
Wholesale vs direct-to-consumer: Different sales channels have different margins and tax implications. Track them separately.

Wrapping Up

Running a fashion design business combines creativity with commerce, and the tax side is simply part of the commerce. Register early, claim every legitimate expense, keep clean digital records, and set aside around 25-30% of your profit for tax. Do that and you can spend more time designing and less time worrying about HMRC.

Accounted helps UK sole traders stay on top of their bookkeeping and tax. Start your free 30-day trial at getaccounted.co.uk

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