In the UK, self-employment income tax is primarily governed by the Income Tax system and National Insurance Contributions (NICs). 

Registration: When an individual in the UK starts a self-employed business, they must register with Her Majesty’s Revenue and Customs (HMRC). Registration is essential, as it allows the individual to report their earnings and pay the necessary taxes.

Income Reporting: Self-employed individuals are required to keep detailed records of their income and expenses related to their business activities. These records are used to calculate taxable profits.

Taxable Profits: Self-employed individuals pay income tax on their taxable profits, which are calculated by deducting allowable expenses from the gross income. Allowable expenses may include costs directly related to the business, such as office rent, equipment, and materials.

Income Tax: The income tax rate for self-employed individuals is determined by the total taxable profits. The UK uses a tiered system with different tax rates for different income ranges. there are basic, higher, and additional tax rates.

Class 2 NICs: Self-employed individuals are also required to pay Class 2 NICs, which provide access to certain state benefits like the State Pension. Class 2 NICs are typically a flat weekly rate and are paid through the annual Self-Assessment tax return.

Class 4 NICs: In addition to Class 2 NICs, self-employed individuals may need to pay Class 4 NICs on their taxable profits. Class 4 NICs are calculated as a percentage of profits above a certain threshold. The rate is tiered based on income.

Self-Assessment Tax Return: Each year, self-employed individuals are required to complete a Self-Assessment tax return. This form is used to report all income and expenses, calculate the income tax and NICs owed, and make any necessary payments.

Payments on Account: Self-employed individuals making significant profits may be required to make payments on account. These are advance payments toward the next year’s tax liability and are typically due in two instalments.

Deadlines: Self-employed individuals must adhere to specific deadlines for filing their Self-Assessment tax return and making payments. Missing deadlines can result in penalties and interest charges.

Record Keeping: Accurate record-keeping is essential to ensure the correct calculation of taxable profits and to support the information provided in the tax return.

It’s important for self-employed individuals in the UK to stay informed about tax regulations and comply with HMRC requirements. Seeking professional tax advice or utilising HHM’s services can help ensure proper tax compliance and may also help in optimising tax efficiency. Please note that tax laws and rates may change over time, so it’s crucial to consult the latest guidance from HMRC or a tax professional for the most up-to-date information.