How to become self-employed

More than 4.57 million self-employed workers in the UK are taking greater control of their career and time, as well as increasing their earning potential. Whether you want to launch a consultancy, creative business, trade service or side hustle, becoming self-employed can create opportunities to build a business around your skills and expertise. Being self-employed involves finding clients, generating income, and taking on responsibility for managing your own finances, tax obligations, business development, and legal compliance.

Our article below, created in collaboration with Markel Tax, explains how to become self-employed in the UK, outlining the practical steps involved in setting up your own business for long-term success.

Decide whether self-employment is right for you

Becoming a self-employed professional means you are choosing to work for yourself rather than be employed by a company. You can either move into self-employment full time, or start alongside existing employment while you build up enough business to make the transition.

Before you make the decision, consider that self-employment may not be ideal for everyone. Working for yourself can involve long hours, potentially uncertain, fluctuating or irregular income, challenges finding and retaining clients, and a lack of employment benefits such as paid leave.

Assessing your financial position and whether you have enough savings to cover the early stages of running your business can help you decide whether to leave your current employment.

Consider financing

Starting a new business from scratch often requires a form of upfront investment, whether it is for equipment, software, training, or professional services – it is essential that you decide how you will cover these costs before launching. Many self-employed professionals initially use personal savings, however you may choose to explore alternative funding options such as business loans, start-up grants, overdrafts, or specialist finance products.

Please be aware, borrowing can increase financial pressure if income is unpredictable.

Select a business structure

One of the first and most important decisions to make is to choose the right legal structure for your business.

Sole trader: Many new self-employed professionals begin as sole traders as it is the simplest and easiest structure to get started with, involving registering with HMRC and filing a Self-Assessment tax return. You can keep all profits after tax, and administration requirements are relatively straightforward, however your personal and business assets are not considered to be separate, therefore you are personally responsible for any business debts.

Partnership: If you go into business with one or more other professionals, you will need to draw up and sign a partnership agreement. Each partner needs to submit a Self-Assessment tax return and becomes responsible for business debts. A Partnership Return is also required and a “nominated partner” is responsible for dealing with this.

Limited company: Some self-employed professionals choose to operate through a limited company, which has its own legal identity and separates personal finances from the business. The company must pay Corporation Tax on profits and submit annual accounts to Companies House. The director and shareholder(s) can receive after-tax profits, but the director will also need to fill in a Self-Assessment tax return for their earnings.

The most suitable option for your business will depend on several factors, including long-term business plans, risk exposure, and expected income levels. Consulting a qualified accountant and/or solicitor can also help you to decide which structure is the most appropriate – given each carries potentially different tax, legal and liability risks.

Register with HMRC

Once you have chosen your business structure, you need to register with HMRC, typically by 5th October following the end of the tax year in which you started trading. HMRC will provide information about Self-Assessment, income tax, National Insurance contributions, and relevant filing and payment deadlines.

Keeping accurate records from the beginning of your self-employment can make tax compliance significantly easier if the business expands.

Open a business bank account

Although sole traders are not legally obligated to have a separate business account, keeping your personal account separate from business transactions can make managing your finances easier. Having a dedicated account can help you track income and expenses, prepare tax returns, monitor cash flow, and demonstrate professionalism to clients. Many business bank accounts also offer direct integrations with accounting software to help simplify financial management.

It is important to have a separate business bank account if HMRC decide to open an enquiry as without this, HMRC are entitled to request sight of all your private bank accounts to check your business income and expenditure.

Create a business plan

Before you begin trading, it is important to write up a detailed, realistic business plan that defines your product or service offering, your niche, target market, and primary competition. The plan should set out your objectives which can help you to develop ideas, and present the business to potential investors if you decide to take on external funding.

Including financial planning in the plan is key as it can help to manage cash flow and ensure the business has sufficient funds to operate. Small business income can fluctuate significantly, particularly during the first year, as expenses can include startup costs, tax liabilities, equipment and software, marketing expenses, and emergency savings.

Build your professional presence 

Establishing a strong professional identity helps potential clients or customers to find and develop trust in your business. This will depend on the industry you intend to operate in, but may include a professionally designed website, an online portfolio, an optimised LinkedIn profile, a Google Business Profile, and social media accounts.

Your website should clearly explain the services you offer, your experience and credentials, and your contact details – testimonials and case studies can also help to build credibility.

Find your first clients

Securing initial clients is often the biggest challenge when becoming self-employed. Many individuals start by tapping into professional networks and existing relationships, including former colleagues, industry contacts, and personal referrals.

Other ways to find clients include networking events, freelance platforms, LinkedIn outreach, industry directories, search engine optimisation (SEO), and content marketing.

Your first satisfied clients can provide reviews and referrals to help you secure future business. Building a consistent pipeline of leads is often more important than occasional large projects for your self-employment to remain sustainable over the long term.

Understand your tax and legal obligations

Self-employed professionals must comply with range of tax, legal and regulatory requirements – if in any doubt always check the HMRC guidance before acting and to ensure you’re fully aware of the tax thresholds and rules. Depending on your industry, this can include tax record-keeping and filing, data protection, consumer protection, professional regulations, industry-specific licences. Taking a proactive approach to compliance can help you to avoid costly disputes and regulatory issues in the future.

In addition to income tax and National Insurance on your self-employment earnings and Corporation Tax if you run a limited company, you are obligated to register for Value-Added Tax (VAT) if you reach a turnover of more than £90,000 in a 12-month period.

Sole traders making qualifying income of more than £50,000 from self-employment or property are required to switch to Making Tax Digital (MTD) to submit and pay income tax as of April 2026. You can find out more about MTD requirements and thresholds here.

Choose an accountant

An accountant can help to ensure your records are accurate and comply with HMRC requirements, provide advice on allowable expenses, and assist with tax efficiency planning, helping you to avoid costly mistakes as your business grows.

When choosing an accountant, consider whether they have experience working with businesses that are similar to yours so that they are familiar with issues which may arise. Check that they are a member of a recognised professional body, such as the Institute of Chartered Accountants in England and Wales, Association of Chartered Certified Accountants or Chartered Institute of Management Accountants. You may also want to compare their services and fees, as some accountants provide ongoing bookkeeping and payroll support, while others focus on annual accounts and tax returns.

Plan for growth

Many self-employed professionals initially focus on replacing their employment income, however long-term success often requires thinking beyond your first clients.

You may decide to increase prices, specialise in a niche market, expand into new services, outsource admin tasks, or hire subcontractors or employees. Regularly reviewing your goals and performance can help ensure the business continues to grow and provide income.

Protect your business

Even small businesses can face unexpected challenges such as client disputes, professional mistakes, tax and VAT enquiries/disputes, cyber incidents, or legal claims.

Depending on your profession or type of business, clients may also require you to hold certain types of insurance before agreeing to work with you. In addition, you may want to consider insuring any expensive equipment you use to carry out your work – having appropriate cover can help provide financial protection and peace of mind. Consider having legal expenses insurance in place to cover the costs associated with running your own business in the event of a legal, tax or VAT dispute. The type and level of insurance cover depends on your individual circumstances and professional advice may be appropriate.

Discover more help and guidance for professionals and read about professional indemnity insurance and employers’ liability insurance to help safeguard your business.

Please note: This article provides guidance for information purposes only and is accurate at the time of production. It should not be relied upon wholly when making or taking important business decisions – always seek the services of an appropriately qualified professional. The views expressed by websites referred to are limited to those of the websites, and do not necessarily reflect the views of Markel Direct. Markel Direct is not affiliated with any of the brands, companies or websites mentioned in this article.