Tax codes are part of the PAYE system, so there isn’t a self-employed tax code as such.
But it’s still important that the self-employed understand certain tax reference numbers, like the Unique Taxpayer Reference (UTR).
Read on to find out everything you need to know about tax codes for the self-employed, including:
HMRC uses tax codes to tell employers how much tax to deduct from an employee’s pay through the pay as you earn (PAYE) system.
PAYE tax codes are made up of a number followed by a letter, for example 1257L. A tax code isn’t unique and lots of people can be on the same one.
The number in the tax code (e.g. 1257) indicates the amount of money you can earn tax-free:
Use the government's guide to tax codes if you’re not sure.
If you’re self-employed, you pay tax on your self-employed income through Self Assessment rather than PAYE. So there isn’t a self-employed tax code for this income.
However, if you have money coming in from other sources besides self-employment, for example a job or a pension, you’ll have tax codes for them.
You can check your tax code by looking at your P45 or your payslip, and challenge it if you think it’s wrong.
You can also sign in to your HMRC personal tax account to check or update your details.
Other ways to find your tax code include using the HMRC app or on a ‘tax code notice’ letter.
Your tax code may change if you start earning income from a job outside of your self-employment.
For example, you still run your cake making business from home but have taken some shifts at a local bakery for extra cash.
If you’re no longer self-employed and return to employment, you’ll need a tax code to make sure you’re paying the right tax and receiving the right wage through PAYE.
Your new employer should give you a ‘starter checklist’ that you can fill out to give them details about your previous employment. This information will be used by HMRC to work out your tax code.
Remember that you also need to let HMRC know that you’re no longer self-employed.
If you’re returning to employment after being self-employed, your new employer may put you on an emergency tax code. These are used when your new employer isn’t aware of the details of your previous income.
There are several emergency tax codes, including:
They’re temporary and your employer will update your tax code when they get the right one from HMRC.
If you have income from both self-employment and employment, you may be able to pay your Self Assessment tax bill through your tax code.
This means that HMRC adjusts your tax code to reflect your self-employed earnings, and will take Self Assessment tax from your salary through PAYE in equal instalments over 12 months.
To use this option you need to:
There are other criteria too, which you can check on the government’s website.
A tax reference that all self-employed people do have is a Unique Taxpayer Reference (UTR). This isn’t a tax code or a National Insurance number.
Instead, a UTR is a 10-digit code that you’re given by HMRC when you register as self-employed. This is your personal reference for Self Assessment.
If you set up a limited company, your company is a separate legal entity, so it will have a separate UTR.
Your UTR doesn’t change. You have the same one throughout your life. If you stop being self-employed and then become self-employed again later, you’ll still have the same UTR.
You can find your UTR on previous tax returns and in your HMRC online account. It’s also found on other documents from HMRC, like notices and payment reminders. If you can’t find your UTR, contact HMRC.
If you’re self-employed, you’re responsible for:
If you stop being self-employed, you need to tell HMRC, otherwise you’ll still be expected to file a tax return and you may be fined if you don’t. Even if you begin paying tax through PAYE and you have a tax code, HMRC won’t automatically assume that you’re no longer earning self-employed income, so remember to let them know.
Check out our tax and Self Assessment resource for more tips.
Are you clear on self-employed tax codes, or do you still have questions? Let us know in the comments.
Conor Shilling is a Copywriter at Simply Business with over two years’ experience in the insurance industry. A trained journalist, Conor has worked as a professional writer for 10 years. His previous experience includes writing for several leading online property trade publications. Conor specialises in the buy-to-let market, landlords, and small business finance.
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