The week of resignation
The week you hand in notice is for sorting the legal framework, not for setting up the new business. Confirm your last working day. Check your contract for restrictive covenants (non-compete, non-solicit, confidentiality) that will apply after employment ends. Note whether you have garden leave or PILON in your contract; either can change when your obligations expire. Use the notice period calculator to confirm the final working day.
Don’t start the new business setup in this week. It’s tempting and there’s often time, but the relationship management with your employer matters; energy spent prematurely on the new venture is energy not spent on a clean handover. The handover is part of the reference and part of the network you’re carrying forward.
The notice period: setup phase
During notice (or garden leave), do the structural admin. Decide between sole trader and limited company (see going freelance after employment for the trade-offs). Form the company if you’re going limited; you can use a formation service like Your Company Formations to get incorporated within a day.
Other notice-period setup tasks: open a business bank account, choose and onboard an accountant (specialist freelance/contractor accountants charge £80-£150 per month and handle everything routine), set up your basic invoicing software (FreeAgent, Xero, or QuickBooks; usually bundled by the accountant), draft a basic contract template, and start conversations with potential first clients that you can continue once employment ends.
The first month after employment ends
Day one self-employed is usually undramatic. The structural work is done; the company exists; the bank account is open; the accountant has your details. What changes is the income side. You move from a known monthly salary to whatever your first invoice raises, paid 30 or 60 days later.
Use this month to register with HMRC for Self Assessment (sole trader) or confirm your corporation tax registration (limited company). Get your first client conversation confirmed and ideally a first project starting. Set up an easy-access savings pot to hold a percentage of every invoice for tax, ideally separate from your day-to-day business account.
Tax: what changes
As an employee, PAYE handled everything. As self-employed, you handle it. The basics: keep records of every business income and expense; file Self Assessment by 31 January after the tax year ends (with payment due the same day); for limited companies, also file corporation tax 9 months and 1 day after year-end, and annual accounts at Companies House within 9 months of year-end.
A reasonable rule of thumb for setting tax aside: 25-30% of every invoice for a sole trader on standard income tax bands; for a limited company on dividends, similar overall once corporation tax and dividend tax combine. Higher earners should set aside more. A good accountant gives you the specific figures.
Pension
Employer pension contributions stop when employment ends. The replacement is a SIPP (self-invested personal pension) or stakeholder pension you contribute to yourself. For sole traders, contributions come from your post-tax income (with tax relief added by the provider). For limited company directors, the company can contribute directly into your pension as a tax-deductible expense, which is usually more efficient.
Don’t skip this. Compound growth over decades is the single biggest factor in retirement outcomes, and the tax-relief mechanics for pension contributions are unusually generous. If a permanent role would have given you 5-10% of salary as employer contribution, you should be matching that yourself as a minimum.
Benefits and protections
Self-employment removes paid sick leave, paid holiday, life insurance benefits, and unemployment protection. Replacements: income protection insurance (typically £30-£100 per month depending on age and cover level), basic life insurance if you have dependents, a sensible cash buffer for slow months, and a reliable accountant who can spot tax-relevant issues before they become problems.
You can still claim Universal Credit if your self-employed income is low; the “minimum income floor” rules apply after a 12-month start-up period. New Style Jobseeker’s Allowance isn’t available because you’re not technically unemployed; you’re in business.
Related
- Going freelance after employment
- Setting up a limited company after leaving work
- Becoming a contractor after redundancy
- Freelance setup checklist
- Can I leave before my notice period ends?
Frequently asked questions
- What's the difference between self-employed and freelance?
- In UK tax law, they're the same. 'Self-employed' is the legal status; 'freelance' is the working pattern (one-person business taking on project work). A contractor working through a limited company is also self-employed for tax purposes. The terms are often used interchangeably.
- Do I need to tell HMRC immediately when I become self-employed?
- HMRC requires registration by 5 October of the tax year after you start trading. So if you start in May 2026, you have until October 2027. In practice, register as soon as you start invoicing; waiting just creates admin friction.
- Can I be employed and self-employed at the same time?
- Yes. Plenty of people work a permanent job and do freelance work on the side. Your employer's contract may have exclusivity or non-compete clauses that limit this; check before starting. Tax-wise, both incomes are reported separately on your Self Assessment.
- What expenses can I claim when self-employed?
- Anything 'wholly and exclusively' for the business: equipment, software, internet, phone (business portion), professional subscriptions, business travel, accountant fees, training directly related to your current work, and a portion of home office costs. HMRC's website lists the categories and rules in detail.
General information about self-employment in the UK. For tax and legal questions specific to your circumstances, contact an accountant or HMRC.
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