Self-employment

Nothing in this page should be taken as legal, professional, accounting or tax advice, we are merely summarising and signposting links to official documentation. You must seek your own guidance from professional advisors where necessary.

If you start working for yourself in the UK, you can be one of the following:

  • A sole trader
  • A partner in a business partnership
  • A limited company

On this page, we cover being self-employed as a ‘sole trader’. The other situations are more complicated and as you will need proper advice from an accountant or other professional organisation, they’re not really covered in here. All the official Government advice and paperwork can be found online at the GOV.UK website, but be warned that it’s not the easiest site to use and can be a bit confusing if you don’t know what you’re looking for. Try this page to start with: https://www.gov.uk/working-for-yourself.

Note that it is possible to have a job with an employer, as well as being self-employed. Many people work at more than one job these days.

On this page

Should you work for yourself as a Ukrainian refugee?

As a Ukrainian refugee, we think it’s important to bear in mind that one goal for life in the UK should be to demonstrate to a potential landlord that you are earning enough to afford to rent. See Renting Privately for more information on affordability checks that you will need to meet in order to rent. The key thing is being able to demonstrate a guaranteed income.

If you have only 6 months with your sponsor, it may be risky to try to establish a new business, navigate all the required paperwork, and build up enough customers in a new country to do this within that time. It may be easier to try and find a job with an employer, which gives you a guaranteed steady income to begin with, so that you can secure a rental property, and wait to set up your business a bit later.

What does being self-employed involve?

The basic process involves:

  • Setting yourself up to be self-employed (registering with the authorities, getting the necessary insurances, licenses and permits depending on your kind of work)
  • Working, and earning income (not covered here!)
  • Keeping track of your likely tax bill to ensure you are putting aside enough money to pay it eventually
  • Submitting (or filing) a tax return after the tax year has finished, in order to pay the taxes you owe to the Government

When you are self-employed, you are responsible for declaring your income so that the correct amount of tax can be calculated and paid – this process is called ‘self-assessment’.

If you have more than one source of income, for example, you’re self-employed and also working for an employer, including any work being done remotely in Ukraine, you would need to declare income from all sources in your tax return.

Guide to setting up as self-employed (sole trader)

The Government have created a step by step guide to setting yourself up as self-employed (i.e. a ‘sole trader’). This guide can be found at: https://www.gov.uk/set-up-self-employed. The guide helps you understand the following aspects around setting up your business:

  • Deciding if being self-employed is right for you
  • The types of names you are allowed to use for your business
  • What records you should keep, and what accounting methods you can use (the two options are ‘traditional accounting’ and ‘cash basis accounting’)
  • How to apply for a National Insurance number
  • How to register to file your tax returns via the ‘self-assessment’ process
  • How to register if you work in construction
  • How to register for Value Added Tax (VAT) returns

Note: Although the Government Guide refers to ‘online registration’ for self-assessment, we have been advised by HMRC that it may be best to set yourself up by phone, as it’s not possible to get through the online identity verification requirements as a Ukrainian refugee. We give a description below of the process.

Contacting HMRC

HMRC (His Majesty’s Revenue and Customs) is the Government department that deals with collecting taxes.

Be warned that they are not the easiest department to communicate with; their phone numbers use complicated voice recognition software to understand what you want to phone about. Just be patient and tell the system ‘I want to speak to an adviser’, then when they ask you what you need help with, say ‘I want help with self-employment / VAT / etc’ (i.e. whatever you are ringing for help about), eventually it will transfer you to a human being. It’s worth knowing that when you do get through to a person, you can ask to speak to a translator.

There are different numbers for different teams; we’ve done our best in this guide to refer to the relevant team at each point.

There is also a webchat option: https://www.tax.service.gov.uk/ask-hmrc/chat/self-assessment; you will initially be speaking to the ‘digital assistant’ or ‘chatbot’, but you can ask to speak to an adviser.

Applying for a National Insurance Number

You will need to have a National Insurance Number (NI number) before you can set yourself up as self-employed. Your NI number is a unique personal reference which ensures that income tax and National Insurance contributions are recorded against your name only. You will have to pay both income tax and NI contributions based on your business profit. 

See National Insurance Number for details on how to apply for one. This can be done online quite easily. You do not need to pay anyone to do this for you.

Registering for self-employment and receiving a UTR

By law, if you earn more than £1000 from self-employment in a tax year, you must set up as a sole trader. You need to tell HMRC that you will pay the required income tax and National Insurance contributions through self-assessment, and you will also need to file a tax return every year so that your tax can be calculated. 

In order to do this, you must register yourself as self-employed. You can do this only up to 7 days before you start work in your self-employed capacity, or once you start work. There are various ways to register, which are described here.

Once you have been registered, the system will create an ‘individual self-assessment record’ for you, and within 2 to 3 weeks, you should get a letter with a 10-digit number called a UTR (Unique Taxpayer Reference). You will need to use this UTR to file your tax returns later on when they’re due.

You do not need to pay anyone to do this for you.

Working in the construction industry

If you’re working in the construction industry as a subcontractor or contractor, some extra rules apply and you need to register with HMRC for the Construction Industry Scheme (CIS) as well. See https://www.gov.uk/what-is-the-construction-industry-scheme.

It is likely you will also need to register by phone using the HMRC CIS helpline: 0300 200 3210, rather than online, due to the online identity verification requirements.

Registering for VAT

If your annual turnover is over £85000, then you must register for VAT (Value Added Tax) and you will receive a VAT registration number. It is certainly advisable to have an accountant involved if this is the case, as there is more complexity and paperwork. You need to add this tax (typically 20%) to invoices for your clients, declare it in your VAT account, and complete a VAT return, which essentially means paying this 20% to the Government. See https://www.gov.uk/how-vat-works.

If you are VAT registered, you can also reclaim the VAT you have paid on items and services that were for business use. You may need to ask for a ‘VAT receipt’ as not all points of sale provide these by default. See https://www.gov.uk/charge-reclaim-record-vat for more details.

We believe that the best way for Ukrainians to register for VAT is by printing off the VAT1 form, completing it (adding your National Insurance and UTR numbers) and posting it. Trying to do it online will probably fail, as you will not have the required documents to complete identity verification. See https://www.gov.uk/register-for-vat/how-register-for-vat for details. The VAT1 form can be found at this link: https://www.gov.uk/guidance/register-for-vat.

Once you have successfully registered, you will receive a 9 digit VAT number from HMRC which should be included on your invoices.

VAT returns need to be submitted every 3 months. See https://www.gov.uk/submit-vat-return for details. It’s a different process to filing your self-assessment tax return.

The telephone number for VAT-related enquiries is 0300 200 3700. Other available help is described here, including online chat: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/vat-enquiries

Business licences and regulated professions

Certain types of businesses require a licence to operate. See https://www.simplybusiness.co.uk/knowledge/articles/2021/10/business-licence-uk-do-i-need-one/ for an overview of this area. You can use the Government ‘Licence finder’ tool mentioned here: https://www.gov.uk/licence-finder to search for the relevant area of business, its location (England, Scotland, Wales or Northern Ireland) and what services are being provided, and the tool will advise you as to which licences or registrations are applicable. For example, beauty services would be located under ‘Personal services’. The licences you require will depend on things like whether or not you need to process personal data for example. Your local council may be able to advise you of the required licences.

Certain professions are regulated in this country, which means you need to have specific qualifications and experience, as defined by the regulatory authority, before you can work in those professions. See https://www.gov.uk/government/publications/professions-regulated-by-law-in-the-uk-and-their-regulators/uk-regulated-professions-and-their-regulators

Business insurance

As a sole trader, you may need to take out certain types of business related insurance, such as:

  • Public liability insurance
  • Professional indemnity insurance

In the UK, carrying out pretty much any kind of business activity normally requires at least public liability insurance. Public liability insurance can cover compensation payments and legal costs if a member of the public (such as a customer, a supplier, or a passer-by) sues your business because they’ve been injured or their property has been damaged at your workplace for example.

See https://www.moneysupermarket.com/business-insurance/what-is-public-liability-insurance/ and https://www.simplybusiness.co.uk/insurance/faq/what-is-public-liability-insurance/ for more information, but you should ask for specific advice.

Professional indemnity insurance is used to protect you in case you make a mistake in the course of your work and have to compensate someone.

See https://www.moneysupermarket.com/business-insurance/professional-indemnity/ and https://www.simplybusiness.co.uk/insurance/professional-indemnity/ for more information, but again, you should ask for specific advice.

You may also want to think about what would happen if you were unable to carry out your work due to an accident or ill-health, or maybe the theft of the tools of your trade. You may wish to take out a type of insurance called ‘critical illness cover’ for example.

Business related expenses

Depending on your type of business, you may be able to offset some of your business related expenses against your profits and so reduce your tax bill. 

This link will give you more details on what counts as a ‘allowable’ business expense: https://www.gov.uk/expenses-if-youre-self-employed. However, the rules aren’t easy or always consistent so we advise speaking to an accountant, or to the Self-Assessment helpline on 0300 200 3310. Keep receipts and records of all expenses.

Some expense types that you may incur, such as for vehicles, working from home or living on your business premises, can be claimed for using a ‘simplified expense calculator’ (see https://www.gov.uk/simpler-income-tax-simplified-expenses). For example, you can keep a log of the dates of all business journeys you made and their mileage, and claim a flat rate based on mileage, instead of actual vehicle running costs of fuel, insurance, road tax etc (see https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-). You’ll need to check if this approach is more cost effective than submitting actual expenses. For all other expense types, you’ll need to record actual expenses.

Tools, equipment, uniform and protective clothing should be straightforward to claim expenses for.

Training is allowable in some cases, but not all; it depends on what your business is.

Phone bills are normally OK to claim but if you use the same phone for work and personal calls, you have to work out the proportions of each and only claim for work calls.

You may find it easier to open a bank account specifically to keep track of your invoices and expenses separate from your personal finances. If you need the additional features of a business bank account, you can compare these on comparison websites such as Money.co.uk.

Calculating your tax owed

The tax year in the UK runs from 6th April to 5th April. Income tax and National Insurance is then payable on your profits (i.e. the difference between your income and allowable business expenses) in this timeframe.

You may find it useful to keep track of the amount of tax you will need to pay as you go along, so that you can make sure you set aside enough money to pay your tax bill. You can use this online tool to estimate what you will owe based on your expected profits: https://www.gov.uk/self-assessment-ready-reckoner.

Filing your tax return

See Self-Assessment Tax Return for details of filing your annual tax return, including deadlines.

Appointing someone to deal with HMRC on your behalf

You can appoint someone to deal with HMRC on your behalf. This could be a paid agent such as an accountant, a friend or a relative. See https://www.gov.uk/appoint-tax-agent for more details.

Support from Universal Credit if you are self-employed

See https://www.gov.uk/self-employment-and-universal-credit for information on the support you can get from Universal Credit if you are self-employed. There are further links here describing how to report your income and expenses.

See our page UK Benefits System for details of benefits in general.

Where to go for further help and support

It’s worth looking to see whether there are any organisations near you which can help you with setting up your business. Your local council may have partnerships with organisations that can help. Talk to your Job Centre also. Some other options are given here: Support For Small Businesses.

The Low Incomes Tax Reform Group have produced a useful set of guides which you may want to explore: https://www.litrg.org.uk/tax-guides/self-employment.