Visas and Work Permits — 7 min
Are you finally sick of office politics? Had the last straw with meaningless meetings? Tired of colleagues stealing your teabags and milk?
Then it might be time to go it alone.
As an independent contractor, you get the freedom and flexibility to make a living on your own terms — and the United Kingdom is an ideal location to become your own boss.
Before you get started, though, you’ll need to understand how to:
Register your business in the UK
Avoid misclassification as an employee
Create compliant contracts that protect you
Invoice and collect payments from around the world
In this article, we’ll cover all these things. We’ll also help you navigate your tax obligations as a self-employed worker, and discuss some of the other risks and liabilities you should be aware of. So pour yourself a cup of tea, and let us take you through it all.
First, it’s important to clarify how the UK defines independent contractors.
Independent contractors are workers who provide paid services to another party. However, they are classified differently to employees, and are not entitled to the same benefits.
According to the UK government, you are “probably” self-employed if you:
Have multiple clients at the same time
Decide how, where, and when you work
Can delegate or subcontract work
Provide your own tools or equipment
Charge an agreed, fixed price for your work
Submit bids or quotes to receive work
Work without supervision
When setting up as an independent contractor, it’s important to be correctly classified to avoid penalties and fines.
To work as an independent contractor in the UK, you’ll need to choose a legal structure for your business. Some of the most popular models include:
Sole trader: A simple structure that is ideal for independent, individual contractors. You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities.
Partnership: A simple partnership agreement. Again, there is no legal separation between the individual and the business; you and your partners are personally responsible for any debts and liabilities. Alternatively, you can set up a Limited Liability Partnership (LLP).
Limited Liability Company (Ltd): A formal, legal entity that is separate from you, the individual. All income and losses are attributed to the company as opposed to you personally. The company must have at least one shareholder and one director.
There are pros and cons to each structure, but most independent contractors opt for the sole trader model, as it is fairly simple to set up and operate.
If you choose this structure, all you need to do is register for self assessment with HM Revenue & Customs (HMRC). Once you’ve registered, you will receive a Unique Taxpayer Reference number within 10 days, which you’ll need to file your tax return. If you don’t already have one, you’ll also need to apply for a National Insurance number.
Note that you may need to obtain certain licenses or permits before you can start working with clients, so be sure to check first.
As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.
Some of the most common ways to collect payments include:
Digital transfer services like PayPal and Wise
These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides the UK, the payment collection process can be even more complicated.
Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in pound sterling — and with no hidden fees. Learn more about how our platform can help.
As an independent contractor, you’re also responsible for calculating and paying your own taxes and social contributions. Like most countries, the UK has a progressive income tax rate that indicates how much you’ll need to pay (although these rates vary slightly if you live in Scotland).
You will need to fill out a Self Assessment tax return after the end of the tax year (April 5). Note that there is a deadline for submission (usually in October), so be sure to submit on time to avoid penalties and fines. HMRC will then calculate your tax bill, and you’ll be required to pay before January 31.
You must also make National Insurance contributions (NICs) if you make an annual profit of over £11,908. If you earn less than this, you can still voluntarily make contributions to avoid gaps in your National Insurance record.
On the flip side, you can claim deductions for multiple business expenses, including:
Advertising and marketing
Training and education
Tools and equipment
As a sole trader, you may also be eligible for a tax-free allowance of up to £1,000.
Intermediaries legislation, known as IR35, is a tax legislation that applies to workers who perform paid work through an intermediary, and is designed to help combat tax avoidance. If you think this might apply to you, you can learn more about IR35 on the UK government website or contact HMRC directly.
If your annual turnover exceeds £85,000 (or you expect it to within the next 30 days), you’ll need to register for and charge value added tax (VAT). Some services and goods, such as financial services, education, and sports activities are exempt from VAT.
In the UK, rules around VAT can be complex, and the VAT threshold changes each year. Therefore, it’s advisable to check your obligations regularly, and speak with a tax professional if necessary.
As a sole proprietor, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to minimize this risk.
It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both UK-based and international clients.
As a sole trader in the UK, you must keep business records and records of your expenses. You can use either the traditional or cash basis accounting method to keep track of everything. These accounts will then be used to calculate your taxable profit.
Specifically, you’ll need to keep records of:
All your sales and income
All your business expenses
Any VAT charged (if applicable)
PAYE (if you employ people)
Your personal income
Any business grants you’ve received
You are required to keep these business records for at least five years.
As we’ve mentioned, contractors are classified differently to employees. The protections and benefits that employees enjoy do not typically apply to contractors.
As a result, companies may deliberately misclassify you to circumvent their legal obligations, while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client.
As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly.
If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.
Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.
You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with UK law.
As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:
Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.
Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in pound sterling hassle-free, without any hidden fees.
When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to UK laws, ensuring that you stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.
With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.
Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.
Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.
By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:
Avoid intermediary fees and delays with international client payments
Draft compliant contracts for UK-based and foreign clients
Enhance your invoice management and avoid manual processes
Comply with local labor laws regarding work practices
Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.
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Visas and Work Permits — 7 min
Visas and Work Permits — 4 min
Employer of Record & PEO — 8 min
Benefits & Leave — 8 min