• Sole Trader

    From £10.00 per month

    A straightforward account for sole traders!

    £0.00 per ATM withdrawal *

    £0.00 per Fast Payment *

Reasons to register as self-employed in the UK

If you are planning to work as a sole trader in the UK, you will need to register as self-employed. Becoming self-employed is not difficult, although you might feel a bit lost at first on issues like filling in tax returns and exactly what tax you need to pay.

Here’s a rough guide to becoming self-employed in the UK, from how to register as self-employed for tax purposes, to answers to some of the most common questions about what is self-employed status in the eyes of the UK tax office.

Remember that if you are in business in your own right, it might be worth setting up a company – even if this is little more than a trading name for your individual business activities – and an experienced accountant should be able to help you decide if this would be more tax efficient for you.

What is self-employed status in the UK?

Self-employed status does not just mean you’re unemployed and making money wherever you can – it is a specific employment status in its own right and when you register as self-employed, it means you are no longer counted as an unemployment statistic.

Even this has its benefits for the long term, as it means in the future, that time will show on your employment record as self-employed rather than unemployed, which is a much more positive addition to any CV or similar application.

Registering for self-employment status also means you can start building a financial history as a freelancer, contractor or sole trader – which again is important as you may need to show at least three successful years of sole trading in order to qualify for major financial products like mortgages.

Things to remember when becoming self-employed

First of all, don’t register as self-employed with no plan of how to earn money. You should think of it as being equivalent to getting a job – and it may mean giving up unemployment benefits you might already be claiming.

If possible, have paid work already lined up before you register as self-employed. To qualify as self-employed, you should ideally have several customers, and you should have control over when and where you work (within reason – some self-employed trades obviously need you to be in a certain place at a certain time).

You’re allowed to do basic online buying and selling without being classed as self-employed, if it’s just a hobby, but if you sell items online regularly for profit, you’ll be classed as self-employed too and should register to pay the appropriate tax.

How to register for self-assessment

Self-employed individuals should register for self-assessment, which allows you to tell HMRC how much you have earned and pay the appropriate amount of tax. You can do this online, or ask your accountant to help you to do so.

You qualify for the tax-free personal allowance when self-employed just as if you were in employment, but you still need to register for self-assessment, even if you don’t earn enough to need to pay tax.

There are also other things to pay – these include National Insurance contributions, which should be calculated along with your tax bill, and student loan repayments if you earn over the relevant threshold.

Managing your professional finances

Managing your professional finances as a self-employed individual can be a bit of a grey area. Your bank will probably try to stop you using your personal account for business activities – but will charge fees for a business bank account.

If you’re not making a lot of profit, you might not want to open a business bank account that charges you for every payment, cheque or cash withdrawal. The Arro Business Account is an alternative with totally transparent fees, and no charges at all on some transactions.

We do not charge for payments into your account – so you don’t have to pay money in order to make money. Your first ten online transfers or Faster Payments and your first ten ATM withdrawals are free too, so if you don’t make many transactions each month, you won’t pay.

Developing your self-employed career

The Arro Business Account is here to support new self-employed individuals and sole traders with the fee-free transactions mentioned above, and if your business activities grow to where you need to make more transactions, we charge low, totally transparent fees that are published on our website for you to check at any time.

You can hold an Arro Business Account as a sole trader, a partnership or a limited company – so if your registered status changes in future, there should be no reason why you cannot keep the same business account, or open a new one in as little as three minutes.