Scottish Income Tax Calculator 2026/27

How to become self-employed: step by step

Six steps with the real deadlines and the official links. Order matters: the registration date is what opens the window for the reduced rate and the VAT threshold.

1. 11. Check your VAT and IR35 status first−

   Two questions decide your structure before you invoice anyone. First, IR35: if your client ends the contract and pays a substitute worker, the client checks your status. If your own limited company is between you and the client, that client is outside IR35 — but clients do check. Second, VAT: you must register if your turnover exceeds £90,000 in any 12 months (from 1 April 2025) — the registration threshold is not a tax allowance.

   gov.uk — VAT registration threshold →

2. 22. Decide: sole trader, limited company or umbrella+

   A sole trader is the simplest and cheapest to set up, and usually best below ~£50-60k profit. A limited company (Ltd) costs ~£50-500 to incorporate plus £0-820/year in accounts and confirmation statements, but moves employment tax off distributions above ~£80k profit. An umbrella company is just a payroll intermediary for contractors inside IR35 — it is not your own company.

   gov.uk — set up a limited company →

3. 33. Register with HMRC for Self Assessment+

   You must register for Self Assessment by 5 October in the second year after the tax year you started trading (31 October for a limited company). You get a Unique Taxpayer Reference (UTR) within 2 weeks. You then file a Self Assessment tax return each year, normally by 31 January, with a balancing payment by 31 July.

   gov.uk — register for Self Assessment →

4. 44. Get National Insurance right+

   As a sole trader you pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above — no cap. Class 2 is voluntary at £3.45/week if your profits are below £7,105 (this preserves your state pension and maternity rights). If you are an employee as well, your Class 4 is reduced by your Class 1 contributions.

   gov.uk — self-employed National Insurance →

5. 55. Claim your allowable expenses properly+

   For sole traders you can use the simplified mileage allowance of 55p per mile for the first 10,000 business miles and 25p after (from 6 April 2026) instead of itemising fuel, insurance, repairs, tax and depreciation. You cannot mix methods for the same vehicle in the same year. For a company car, use the Advisory Fuel Rates to work out the benefit charge instead.

   gov.uk — allowable business expenses →

6. 66. Put money aside for tax and for the gaps+

   HMRC expects tax to be paid in instalments via the Making Tax Digital quarterly updates (payments on account), and charges interest and penalties if you pay late. Separately, a 1099 or SEIS-free freelance contract pays nothing between contracts: budget 20-30% of your rate for unpaid time, pension, holiday and sick pay that employees get for free.

   gov.uk — pay your Self Assessment tax →

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