A guide to going self-employed

Customisable business insurance
11 January 2024
13 minute read

A version of this article was originally published in May 2021.

Self-employment. Millions choose it, and a good chunk fall into it by accident.

Whatever your story for becoming self-employed, an action-driven plan can help ease your business into things — from navigating the official self-employment gov.uk pages to your first self-employment Self Assessment.

Copy the following 15 point self-employment checklist to your to-do list and read on to find out more details — like how to tackle insurance costs (it’s our specialist subject, after all) as well as more fiddly things like the CWF1 form, record keeping and IR35.

What's in this guide?

Self-employment checklist — our top 15

To get you started, here are 15 top tasks to action when going self-employed:

1. Weigh up the pros and cons
2. Sole trader or limited company (or something else)? — decide on your structure
3. Is it a side hustle? Do you need to tell your employer? (read our guide to getting a side hustle off the ground)
4. Register with HMRC
5. Get to know your tax responsibilities
6. Choose a business bank account
7. Look into other services (from accounting to tax, to legal support)
8. Keep super-tight business records
9. Look into self-employed insurance
10. Check requirements from your trade bodies, unions or memberships (if you have them)
11. Understand IR35
12. Investigate self-employed pensions
13. Check your mortgage or tenancy agreement for eligibility
14. Make a list of potential self-employed grants and government assistance
15. Set up alerts and updates from HMRC and Google Alerts to keep in the loop

Hold on to that checklist, and we’ll cover everything in more detail below. Plus, you can also read further information in our guide to being self-employed.

Pros and cons of going self-employed

Going self-employed — is it right for me?

Working out how to be self-employed can involve a lot of soul-searching. Taking action is half the battle, so grab a blank sheet or open a new doc and try setting out all the advantages and disadvantages of self-employment, for someone like you.

These will vary depending on your situation, but we’ve covered some of the most common points here:

Advantages of self-employment

Flexible hours

Getting control over your own time prompts lots of people to set up as self-employed. The theory goes, you have more chance to achieve that elusive work/life balance.

Flexible location

Wave goodbye to office cubicles and commutes. Being your own boss means choosing your own workplace. And if Covid-19 has proven anything it’s that lots of us can work from almost anywhere.

Cheaper startup costs

This varies a lot depending on what you’re doing, but many freelancers need nothing but their own brains and some fairly accessible bits of kit like a laptop or camera.

It’s becoming more accessible

Services, social networks, coworking spaces, apps, tech, organisations and lots more are forever popping up, all aimed at helping small, self-employed contractors towards success.

Thinking about using a coworking space? Read our guide to coworking space success.

Disadvantages of self-employment


The reassuring weight of the monthly pay cheque vanishes when you go self-employed. If you don’t get work, you don’t get paid. All freelancers experience lean months — and they’re stressful.


If you’re the type who needs people around to bounce off, be prepared for a shock. Isolation is one of the major issues freelancers struggle with. Co-working spaces can be a good compromise.

No employment benefits

This is a biggie. If you get sick and can’t work, you’re out of pocket. Holidays won’t be covered by holiday pay.

All of those safety nets available to employees will vanish once you register as self-employed. So, take a deep breath and prepare yourself.

Extra admin

You don’t just have to do your actual work as a self-employed contractor. You also have to do the work that enables you to do your actual work. By which we mean admin. Lots of it.

Sole trader vs limited company (or something else)?

You need to decide on a legal structure for your business. And while this can be difficult, bear in mind that you can change this up in the future.

Businesses grow and shapeshift, so decide on a structure and keep it under review.

Am I a sole trader?

This is the UK’s most popular type of business. If you’re a sole trader you’re the only (‘sole’) owner of the business, and are self-employed. HMRC lets you keep all your profits after tax, but you’re also personally responsible for any losses your business makes.

You’ll need to keep to certain government rules on running and naming your business, too. For example, you can’t include the words ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’ in your business name.

Am I a limited company?

Limited companies are less common, but millions of UK businesses do fall under this legal structure. You’re either limited by shares or guarantee, and the company:

  • Is legally separate from the people who run it
  • Keeps its finances separate from your personal ones.

Some limited companies may have shares and shareholders, while others run with guarantors.

Are there any other options?

Yes — you could also set up as a business partnership, a social enterprise, an unincorporated association or an overseas company.

All of these come with different structures and responsibilities, so check the self-employment gov.uk hub for help with setting up your business.

Side hustles and your employer

Lots of people dip a toe into self-employed life while holding down their ‘day job’, and it makes sense. Retaining the safety net of employee benefits and a set salary isn’t to be sniffed at, when you’re still figuring things out.

If this sounds like you, you’re a bit of both — self-employed and employed — and you’ll usually need to pay tax for business through Self Assessment, and for the income you get from your employer, through their PAYE.

Don't forget to consider insurance for your side hustle either.

It could be worth a chat with your HR and/or payroll team to figure out what policy they have and how the tax set-up will work, but this will depend on your personal circumstances and employee contract.

If your side hustle presents a conflict of interest with your job or ‘non-compete’ issues, for example, you could run the risk of being fired or sued.

Registering as self-employed

HM Revenue & Customs (HMRC) self-employed legal requirements can usually be accessed and checked off using gov.uk.

This will be the starting point for a lot of your business admin, especially when it comes to registering as self-employed.

Sole traders

As a sole trader, you’ll need to register with HMRC to pay tax through Self Assessment (or re-register using the CWF1 form), and file a tax return every year.

You’ll also need to keep tight records of your business outgoings and sales, pay Income Tax on your profits and specific self-employed National Insurance (NI) contributions and register for VAT if your turnover is above the current £85,000 threshold (you may also choose to register voluntarily).

It's important to note that if you're trading through sites like Vinted, Airbnb or eBay, these sites will collect and share details of your transactions with HMRC as of January 2024.

HMRC then has the power to seek out anyone who should be declaring any extra income but isn't. Take a look at the full details to see if you might be affected.

Work through our tax guide for self-employed professionals for a deeper dive on Self Assessment and HMRC.

Do you work in the construction industry? If so, you may need to register with HMRC for the Construction Industry Scheme (CIS).

Limited companies

Most limited companies will need to work through these key tasks to be registered correctly:

  • Register an official address
  • Choose a standard industrial classification of economic activities (SIC) code
  • Register with Companies House
  • Register for Corporation Tax and, depending on your taxable turnover, VAT.

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Choosing a business bank account

On the topic of HMRC, lots of business bank account options will offer a tax service as part of your account with them.

From a full-on accounting suite to a simple estimate of your taxable income, business banking brands will often let you choose between a few different plans.

Wondering what to look for? And where to shop around? Comparison sites might sound obvious but they do provide a good round-up of the most popular banks and the pros and cons of their business banking options.

Additional benefits to look for are no fees (at all or for a certain period), overdraft flexibility, in-credit interest and, let’s face it, a great app and seamless usability. There’s few things worse than a rubbish banking app.

Remember, limited companies are legally required to have a business bank account.

There’s a temptation to keep things close and wear all hats when you set up a business. Letting go of even the smallest task or aspect can be tough, especially when, so far, it’s just been you and a laptop or other essential kit.

But when it comes to legal issues, your office tech set-up or a complex tax return, handing over to the experts can make huge business sense.

It frees you up to focus on what you do best, whether that’s being a personal trainer to the stars or tutoring by Zoom. No one’s expecting you to be a legal whizz so don’t try to be.

How to keep business records

Your business records will start with your income and expenses. Keeping track of these is essential, especially when you come to file your tax return.

There are different rules for record-keeping, and your responsibilities will depend on whether you’re a sole trader, partner in a business partnership or limited company (or a different type of legal structure).

Key things to think about are:

  • Your accounting and whether you'll use traditional accrual accounting or cash basis accounting
  • Specific records for sales and income, business expenses, PAYE records, VAT records, grants you’ve claimed and personal income (remember, some of these may not apply to your business)
  • How long to keep business records gov.uk sets out specific requirements, depending on your circumstances.

You’ll need to decide on the tools you’ll use to maintain your records, from a Google sheet to working with a full accounting service (we don’t recommend keeping it all in your head).

Looking for accounting software?

Head to our guide to the best accounting software for small businesses.

Self-employed insurance

From public liability insurance for self-employed businesses — built to protect you against expensive claims for injuries or property damage — to other key protection like employers’ liability cover and professional indemnity insurance, a comprehensive insurance policy can be key for the self-employed.

Use our site to get to grips with the kind of self-employed insurance you might need.

Do I need business insurance? What about other trade requirements?

If you have a team or even just one staff member, employers’ liability insurance is usually a legal requirement.

And many trade bodies, authorities and memberships will call for certain insurance and accreditations or qualifications. For example, a specific amount of professional indemnity insurance is often required.

IR35, self-employed life and what you need to know

What is IR35? And does it apply to sole traders? We’ve written it all up in a deep-dive IR35 guide for contractors, but here are three key points:

  1. IR35 legislation covers off-payroll working rules for clients, contract workers and their intermediaries
  2. It’s an anti tax-avoidance focus, designed to make sure businesses are paying tax properly in relation to their contractor-client contracts
  3. From 20 April 2021, your client(s) will need to assess what type of contract they have with you, whether it falls ‘inside IR35’ and if so, ensure PAYE and NICs (National Insurance Contributions) are paid properly.

The client will need to perform this assessment for every contract they have with you — bad news for contractors, as it can discourage businesses from going through the risk and rigmarole of outsourcing their work.

Do I need a self-employed pension?

Again, one of the things you can kiss goodbye to when registering as self-employed is an automatic workplace pension.

That, plus lots of other self-employment income bugbears, like paid holiday, paid sick leave, maternity and paternity leave, or personal days.

Fortunately, the world has caught on to the millions of sole traders in this position, and self-employed pensions are relatively easy to research and set up. The difference is, you need to be on the case with it.

No-one is going to do it for you, and the new State Pension currently yields £203.85 a week. Most people will need more than this to fund their retirement, so it’s wise to be on the front foot.

Need to set up a pension? Bookmark our guide to self-employed pensions.

Check your mortgage or tenancy paperwork

Whether you own your own property or are renting, becoming self-employed changes your income stream, and how easily you can afford to keep up with your mortgage repayments or rent.

It’s worth knowing how this might affect your standing with your mortgage lender or landlord.

If you’re self-employed and applying for a new mortgage, you may find lenders aren’t as happy to cough up the cash. Plus, they usually ask for payslips, which you won’t have, along with proof of a steady income stream, which can be hit and miss.

Instead, you’ll need to supply copies of your Self Assessment tax returns.

Also, if you're starting your business from your home, you may need permission from your local council, mortgage provider or landlord.

If you’re service based, it’s not likely to be an issue. But if you’re planning to turn your quiet country cottage into a small factory or distribution centre, you’ll certainly need to check and may need to apply for change of use planning permission.

Self-employed grants and government help

Hop straight over to our list of small business grants in the UK.

From European Innovation Council grants, to research and development (R&D) tax relief and innovation funding, help is available at every level and stage of growth.

Setting up as self-employed FAQs

Do I need to register as self-employed?

Yes – but the kind of registration you need depends on whether you’re setting up as a sole trader or as a limited company.

If the former, you just need to set up as a sole trader with HMRC. You fill out a self-assessment tax return every year, and Bob’s your uncle.

However, this option does not separate your company from your own personal tax account – meaning that you’re directly liable for any problems which your business incurs.

If you become a limited company, your business is recognised as a separate entity so you’re not personally liable if your business gets into debt. There are also tax perks. However, there is also a ton of extra paperwork which comes with this.

When should you register as self-employed?

From HMRC’s perspective, you need to register as self-employed within three months of initial trading. From your own perspective, you may want to ease yourself in gradually before taking the plunge and going fully self-employed.

Put some feelers out, get some potential clients on board and some projects in the pipeline before you quit your day job. Freelancing comes with a lot of inherent insecurity, so it’s a really good idea to make sure your self-employment plan is viable before you jack in your reliable salary.

Can I have a job and be self-employed?

Honestly, it depends on how many plates you’re capable of juggling. If you’re asking ‘can I have a full time job and be self-employed?’ we’d query how much time and energy you intend to devote to either endeavour.

If you’re asking ‘can I work part-time and be self-employed’ — well, that’s more viable, and it’s a good way to keep cashflow reliable in the early days. However, as your business grows it will get harder and harder to balance multiple commitments.

How much should a freelancer charge?

A lot of freelancers start off with low rates, in order to attract business. But do be aware that pricing yourself too low could make clients suspicious that the quality of your work will be correspondingly low.

Remember, you need to cover your costs — and your time is valuable! Research the market standard rate, and test the waters. Most self-employed contractors work out what to charge through experience.

Don’t be afraid to experiment with pricing. So long as you’re honest and transparent, you’re the boss of costs.

How do I get work as a freelancer?

There’s no hard and fast way to get work as a freelance contractor. Word of mouth is always excellent — so work your existing network.

You may also want to set up your own website, proactively market yourself, and look into online freelancing marketplaces such as Upwork or The Work Crowd.

This content has been created for general information purposes and should not be taken as formal advice. Read our full disclaimer.

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