Step 1: choose your structure
The first decision is sole trader or limited company. Sole trader is simpler, free to start, taxed at your normal income tax rates. Limited company is more setup but more tax-efficient above roughly £30,000-£40,000 of annual profit, with the added benefit of personal liability protection.
A common pattern: start as a sole trader if you’re testing whether freelance work suits you, or if your expected profit in year one is modest. Upgrade to limited company once revenue is consistent and the tax efficiency starts to matter. See sole trader vs limited company for the detailed comparison.
Step 2: register with HMRC or Companies House
Sole trader: register for Self Assessment on gov.uk. The form is straightforward; you’ll get a Unique Taxpayer Reference (UTR) in the post within 10 working days. The UTR is what you’ll use for your annual Self Assessment.
Limited company: register at Companies House (online, £50, usually completed within 24 hours). HMRC is automatically notified and opens your corporation tax record. Your company gets a Companies House number and (within 14 days) a corporation tax UTR by post.
Step 3: open a business bank account
Limited companies legally require a separate business account; commingling company and personal money creates accountancy and tax problems. Sole traders aren’t legally required to have a separate account, but it’s strongly recommended for the same reasons.
Challenger banks (Tide, Starling Business, Monzo Business) open accounts in 1-3 days online. High-street banks typically take 1-2 weeks. Most charge £5-£10 per month for a basic business tier. Some are free for low volumes.
Step 4: decide on an accountant
For sole traders with revenue under £50,000, accounting software (FreeAgent, Xero, QuickBooks) is often enough; the annual Self Assessment is straightforward and you can DIY. For sole traders above £50,000 or for any limited company, a specialist freelance/contractor accountant is usually worth the £80-£150/month they charge.
A specialist accountant bundles: annual accounts (limited companies), corporation tax return (limited), payroll if you take a salary, VAT returns (once registered), Self Assessment for any dividend income, accounting software (often FreeAgent free with the service), and ad-hoc advice on the tax-efficient way to structure your income.
Step 5: send your first invoice
The first invoice is a real moment. The standard UK payment terms are 30 days from invoice date; some clients pay faster, some slower. Always include: your business details, the client’s details, your bank details, the invoice number, an itemised description of the work, and (if VAT registered) your VAT number and the VAT amount.
Most accounting software generates compliant invoices from a template. Most clients pay by bank transfer to the account on the invoice. Payment terms can be agreed shorter (14 days, 7 days) if a client agrees in writing before the work starts; the default is 30 days unless otherwise stated.
Tax basics for the first year
The single most important habit in year one is setting aside money for tax with every invoice. As a rough rule: 25% of net invoice value for a basic-rate sole trader; 30% for higher-rate; similar combined figures for a limited company across corporation tax and dividend tax. Keep this in a separate savings pot, not in your main business account where it gets mistaken for available cash.
The Self Assessment payment date is 31 January following the end of the tax year. So tax for the tax year ending April 2026 is due January 2027. The first January after starting often includes a payment on account for the following year, doubling the bill. Plan for this in your tax savings pot.
IR35 awareness
If you’re doing contractor-style work for one main client (long-term engagement, full-time hours, working at their offices), IR35 may apply. IR35 catches contracts that look like employment but are paid through a limited company for tax efficiency. Inside-IR35 contracts are taxed at employment rates, removing the tax benefits.
Pure freelance work for multiple clients (project-based, shorter engagements, your own equipment and workplace) isn’t usually caught. Long-term single-client contracts often are. Specialist contractor accountants assess each contract; for high-rate work it’s worth paying for an IR35 review before signing.
Realistic timelines from start to first paid client
Existing network produces first contracts fastest. Sending notes to 20-30 ex-colleagues and contacts in week one usually produces leads within 2-4 weeks. Specialist contractor agencies take 4-8 weeks for a first placement. Cold outreach and job boards typically take 6-12 weeks.
Most new freelancers land the first contract within 4-12 weeks of being fully set up. Payment terms then add another 30-60 days to first cash in the bank. So plan for 8-16 weeks from day one to first money received. Whatever runway you’ve built needs to cover this.
Frequently asked questions
- How do I start freelancing in the UK?
- Five steps: choose your structure (sole trader or limited company), register with HMRC or Companies House, open a business bank account, choose an accountant if needed, send your first invoice. Most people can complete the first four steps within a week.
- Do I need to register a business to freelance?
- Yes, but the form varies. Sole traders register with HMRC for Self Assessment. Limited companies register at Companies House (which automatically notifies HMRC). You have until 5 October of the tax year following the start of trading to register, but doing it immediately is cleaner.
- How much tax do UK freelancers pay?
- Sole trader: income tax at your marginal rate plus Class 2 and 4 NI on profit. Limited company: corporation tax on profit (currently 19-25%), then dividend tax on dividends you draw. As a rough rule, set aside 25-30% of every invoice for tax, more if you're a higher-rate taxpayer.
- What's IR35 and does it affect freelancers?
- IR35 is HMRC's anti-avoidance rule for off-payroll working. It applies to contractors working through a limited company. Inside-IR35 contracts are taxed like employment (PAYE). Outside-IR35 contracts get the normal limited-company tax treatment. Pure freelance work for multiple clients isn't usually caught by IR35; long-term contracting with one main client often is.
General information about starting freelance work in the UK. For tax and IR35 questions specific to your situation, consult a specialist freelance accountant.
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