Guide to Becoming and Working as a Freelancer in United Kingdom

Have you ever considered what it takes to set up a freelance business in the UK?

Freelancing abroad can be exciting and rewarding, but you need the right resources to succeed. Xolo.io is here to help you prepare for your journey. Below you’ll find an overview of the steps needed to be a self-employed worker in the UK.

Get a Visa to Freelance as a Foreigner in the UK

To live and work in the UK, any freelancer nationalized outside of the UK or Ireland must first secure an appropriate work visa. In general, only highly skilled applicants will qualify for the available visa categories. Do some research online at gov.uk to see if your skills are a good match for the kinds of work allowed and the length of time you want to stay. You should also acquire a biometric residence permit or card or provide your passport or national identity card as proof of identity.

Here are some of the visa categories available to expat UK freelancers in 2022:

Global Talent Visa

The five-year, renewable Global Talent visa is designed for internationally published, exceptionally capable academics, researchers, creatives, and digital technology innovators. You must showcase your achievements and eligible awards or secure an endorsement in your area of specialization. After three years, the Global Talent visa offers a fast track to permanent residency. Costs include the £623 application fee plus the £624 healthcare surcharge.

High Potential Individual Visa

The High Potential Individual (HPI) visa allows international graduates to come stay and work in the UK within five years of earning their degree. Your educational level and qualifications will determine if your visa is valid for two or three years. When your HPI visa expires, you may be able to continue working by switching to a different type of visa. Applicants from outside the UK pay £210 to validate their eligibility, plus a £715 application fee and a £624 healthcare surcharge. You’ll usually need to have at least £1,270 available to meet the financial requirement for this visa.

Service Suppliers Visa

Self-employed professionals may qualify for the single-use, non-renewable Service Suppliers visa so long as they secure a contract before beginning the project work in the UK. This short-term visa generally lasts 6 or 12 months. You will need to pay the £259 application fee, the £624 healthcare surcharge, and have at least £1,270 available in your bank account to meet this visa’s financial requirements.

Start-up Visa

The Start-up visa is an unsponsored, non-renewable, two-year UK work visa designed for applicants who intend to work while setting up their first business in the UK. You must secure endorsement from a university or a qualified business in the UK and meet the financial and English-language requirements. Eligible applicants may switch to the Innovator visa when the Start-up visa expires. If you reside outside the UK, the application fee for a Start-up visa is £363. You need to have had at least £1270 in your bank account to meet the financial requirement, and you will also have to pay the £624 healthcare surcharge.

Innovator Visa

The Innovator visa is a renewable three-year visa for experienced English-speaking entrepreneurs who have secured at least £50,000 in funding for their venture. Candidates who previously held a Start-up visa and are involved with the daily operations and growth of their business may also qualify. Your business idea must be assessed for viability and endorsed before approval. After 3 years, successful participants may apply for settlement. Candidates outside the UK must pay a £1021 application fee plus the annual healthcare surcharge.

Set Up Your Business as a Freelancer in the UK

As you consider applying for the visa that best fits your goals, you want to think about how you will formally establish your business. In the UK, a freelancer should register to work as a sole trader or a limited company.

Sole Trader

The term "sole trader" designates the most basic form of self-employment. You are required to sign up with Her Majesty’s Revenue and Customs (HMRC) and pay self-assessment taxes against your income, gains, losses, allowances, and compulsory National Insurance contributions. You will also need to keep records of incoming and outgoing invoices and receipts for six consecutive years. Opening a business bank account is recommended but not legally required.

Limited Company

A limited company gives you complete financial and administrative control and responsibility over your business. It may also provide the most favorable taxation scheme. Setting up your limited company online is ideal and faster than applying directly to Companies House. You may also choose to have an accountant set up your company. You must keep Companies House informed of any changes to your business and file an annual report once a year.

Umbrella and Agency Pay As You Earn

Freelancers may enter into contractual agreements to become pay as you earn (PAYE) employees of agencies or umbrella companies. The tradeoff for the convenience and reduced administrative burden of working under such an arrangement can be lower pay, reduced benefits, and a heavier tax burden.

Besides the option of registering your business in the UK, you’ll have another choice of having your freelance business set up by Xolo Leap with Estonian e-Residency. You’ll have your solo EU business with our set of accounting and management tools to help and the access to the EU market. The dream of having your business and running it from anywhere you want comes true now!

Register to Pay Taxes as a Freelancer in the UK

Common Legal Forms

There are taxation obligations for freelancers in the UK that you should consider when you plan your business operations. Self-employed workers in the UK are obliged to pay income tax. During tax season, freelancers may need to file any or all of several legal forms, including the Self Assessment Form SA100, form CT41g (the new company enquiry form), your annual corporation tax return, and VAT returns.

Self-Assessment Tax

All freelancers must acquire a National Insurance number and register online for self-assessment with HMRC. You will pay income tax on your trading profits, which equals your total income minus allowable expenses. Your tax rate increases as your earnings increase. You are also entitled to a personal allowance that decreases in proportion to your earnings exceeding £100,000. Tax benefits can differ for sole traders and limited companies. Generally speaking, you are required to make two advance payments on your account every year, online, by phone, by mail, or through your bank. If you miss critical deadlines, you will be subject to penalties and interest.

Value-Added Tax (VAT)

Freelancers will also register to pay value-added tax (VAT) to HMRC through a VAT online account (sometimes known as a Government Gateway account) if their taxable turnover for the previous twelve months exceeds the current VAT threshold (£85,000 in 2022). The VAT rates fall into three categories: the standard rate of 20%, the reduced rate of 5%, and the zero rate. You can learn more about the VAT rate categories for freelancers in the UK here.

How to Invoice as a Freelancer in the UK

As a freelancer, you are required by law to produce an invoice if you and your customer are registered for VAT. Invoices include your name, business name, business address, and the due date and amount of payment. To simplify your invoicing processes, we recommend that you use an invoicing tool dedicated for freelancers and contractors like Xolo Go. With the instant invoice generator and automated VAT calculator, you’ll be able to send VAT-compliant invoices to 150 countries with so much flexibility.

the freelancer's favorite pay-as-you-go invoicing tool

How to Open a Bank Account as a Freelancer in the UK

Sole traders in the UK are encouraged but not legally required to have a business bank account. A dedicated business bank account is legally required for limited companies.To open your UK account, you must secure proof of identity, such as a passport, driver’s license, or identity card (for EU citizens). You must also provide proof of address for your home and business, such as a recent utility bill or rental agreement. Limited companies must provide documentation for their Companies House registration number, corporate leadership structure, and estimated annual income. Check with your prospective bank to learn more about its requirements. You may need to meet the bank’s business manager or a dedicated staff member to discuss your expectations and business plan before opening the account.

Get Insurance as a Freelancer in the UK

At a minimum, freelancers in the UK must have health, business, and property insurance. Some freelancers may also need additional public liability insurance, employers’ liability insurance, building insurance, and auto insurance. The basic types of coverage every freelancer needs are briefly discussed below.

Health Insurance

Health insurance is not compulsory, but you should take advantage of the free National Health Services (NHS) coverage provided to citizens and expats. You can also pay for private health insurance coverage.

Business Insurance

Although professional indemnity or liability insurance is only required for a particular set of professions, it is prudent for all freelancers to consider this protection against damage to their financial standing or professional reputation.

Contents Insurance

Contents insurance can protect your business equipment and property. The cost of your policy usually reflects the value of the insured items. Your coverage depends on the policy you choose. Many insurance policies will protect you in the case of fire, theft, or flooding. Some insurance policy premiums protect against accidental damage and theft to personal possessions on or off your property. You can compare policies online. Make sure you understand your coverage. Read the fine print, and be wary of exceptions.

How Xolo Makes It Simple to Freelance in the UK

Xolo can make your freelancing adventure easier by eliminating the hassle and expense of registering your business. Our partnership model shares our legal framework across borders and handles compliance and accounting in the background. We help you get paid, create invoices, and manage expenses so you can spend your time and talents on the work you love to do.

The opportunities for personal and professional enrichment make starting your business worthwhile, but as you can see, the administrative overhead required to become a freelancer in the UK can be daunting. Getting a visa, choosing a business structure, registering your business, opening a bank account, getting insurance, registering for taxes, setting up invoicing, and establishing an accounting and record-keeping system are essential requirements for successful freelancing in the UK. 

Invoice cross-border with Xolo Go or launch your EU business with Xolo Leap.

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