Starting a Self-Employed Side-Hustle: Registration to First Invoice
Starting self-employment is straightforward — register with HMRC and start trading. But getting it right from day one saves serious tax pain later. This guide takes you through the steps.
Estimated timeline
Sole trader: easiest to set up, simplest tax (income tax + Class 4 NI on profit), no public accounts, profit is yours personally. Best for low profit (under £30k), single-person business, low liability risk. Limited company: separate legal entity, corporation tax (19-25%), no income tax on retained profit, more admin (Companies House annual filings), but allows tax-efficient salary + dividend split. Best for higher profit (£40k+), liability concerns, intent to scale. Take advice from an accountant before deciding if uncertain.
Register at gov.uk/register-for-self-assessment within 5 October following the end of the tax year you started trading. Failure to register on time = £100 penalty. You get a Unique Taxpayer Reference (UTR) and an HMRC online account. You will use Self-Assessment annually to declare income and pay tax. From April 2026, Making Tax Digital ITSA applies if your income is over £50,000; 2027 if over £30,000.
Get a business bank account and accounting software
Even for sole traders, keep business and personal money separate. Most banks offer free business accounts for the first year, then £8-£15/month. Tide, Starling, Monzo Business are popular for sole traders. Accounting software: FreeAgent (free with NatWest/RBS business accounts), Pandle (free), QuickBooks/Xero/Sage (£20-£40/month). MTD-compatible software is required from April 2026 if you cross the income threshold.
Public liability insurance: £80-£250/year, essential if dealing with clients. Professional indemnity insurance: £100-£500/year for advisory or design work. Employers' liability insurance (£60-£200/year): legally required if you employ anyone (even one part-time person). Industry licences may apply (alcohol, food, taxi, construction CITB). Check with your local council. Specific regulations apply to trades — gas (Gas Safe), electrics (NICEIC), childcare (Ofsted).
Plan your first invoice
Set up before first saleDecide pricing: time-based (£25-£100/hour for most service work), fixed-fee per project, or productised. Invoices must show: your name and address, the client's name and address, invoice number (sequential), date issued, date payment due (usually 14-30 days), description of work, amount before/after VAT (if VAT-registered), VAT number if applicable, your bank details. Accounting software generates these automatically. Send invoice promptly after work completes. Chase politely after 7 days late, formally after 30 days.
Use accounting software from day 1. Record every sale (income) and every business expense (deductible). Keep receipts (paper or digital photos) for 5 years 10 months. Allowable expenses include: materials, stationery, phone/internet (apportioned), business travel, work clothing (with logo only), accountancy fees, professional subscriptions, training related to your business, simplified home-use £10-£26/month flat rate. Avoid mixing personal and business spending.
Save 25-30% of every payment for tax. Open a separate savings account labelled "Tax" and transfer immediately on payment. Tax is paid in two instalments per year: 31 January (balancing + first payment on account) and 31 July (second payment on account). Late payment incurs 7%+ interest. From April 2026 (or 2027 if £30k-£50k), Making Tax Digital ITSA brings quarterly updates instead of one annual return.
Build the business
OngoingMarketing: LinkedIn for B2B, Instagram/TikTok for B2C, your own website (Squarespace, Wix from £15/month or WordPress). Networking: BNI, local business events, online communities. Reviews: Google Business Profile (free), Trustpilot for service businesses. Repeat clients are gold — overdeliver on the first job. Consider whether to incorporate as a limited company once profit reaches £30k-£40k.
Frequently asked questions
When do I have to register for VAT?
Can I work for one client only and still be self-employed?
Do I need a name for the business?
What if I make a loss in Year 1?
Official bodies and resources
HM Revenue & Customs
GovernmentResponsible for collecting taxes, paying some forms of state support, and administering national insurance.
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