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For Sole Traders
If you are a business owner or starting your own business in the United Kingdom, your status will be "self-employed" and you must register as a sole trader with HMRC (Her Majesty's Revenue and Customs).
To register, you must have a National Insurance (NI) number, live and work in the UK.
From the 2017/18 tax year onwards, you are not required to register if your income (not your profit!) remains under £1,000.
Registration with HMRC is only necessary if:
Your income exceeds £1,000
You need proof of self-employment status (e.g., for Tax Credits)
You wish to voluntarily pay Class II National Insurance contributions to maintain your entitlement to benefits
After registering, you must also pay your own National Insurance (Class II NI), which is £3.50 per week.
However, you do not need to pay Class II NI if your profit is above £6,845.
If your profit is below that, you can choose to pay it voluntarily so that the year counts towards your future State Pension.
Starter Package
Monthly transaction recording
Bank reconciliation (1 account)
Basic income & expense reports
Email support
£49/month
Standard Package
Monthly transaction recording
Bank reconciliation (up to 2 accounts)
Monthly profit & loss report
Annual tax return support (Self Assessment preparation)
Priority email & phone support
£79/month
Premium Package
Unlimited transaction recording
Bank reconciliation (multiple accounts)
Full monthly management reports (P&L, Balance Sheet, Cash Flow)
VAT returns (if registered)
Annual Self Assessment filing
Dedicated accountant contact
Support with HMRC correspondence
£99/month
National Insurance
Class II National Insurance
After registering as self-employed, you are required to pay Class II National Insurance, which is £3.50 per week.
However, you are not required to pay Class II NI if your profit is above £6,845.
If your profit is below that amount, you can choose to pay it voluntarily to ensure the year counts towards your future State Pension eligibility.
Class II NI contributions count towards your entitlement to the State Pension, Maternity Allowance, and maternity-related leave, but they do not count towards sick pay or unemployment benefits.
Exemption from paying Class II NI:
If your business profit is less than £6,845, you can apply for an exemption from paying Class II NI due to low income.
However, in that case, you would not be entitled to the State Pension or other related benefits — so it is usually recommended to pay it voluntarily.
It often happens that someone is employed and also registers as self-employed as a second job.
In such cases, your employer deducts Class I NI from your salary, and you can apply to be exempt from paying Class II NI on your self-employed income — without any penalties — provided your self-employment profit does not exceed £6,845.
Class IV National Insurance
You are required to pay Class IV NI (6%) if your annual profit exceeds £12,570 (for the 2025/26 tax year).
In this case:
You must pay 6% on profits between £12,570 and £50,270,
And 2% on any profit above £50,270.
Class IV National Insurance contributions are calculated and submitted along with your Self Assessment tax return, and they must be paid at the same time as your tax bill.
Important:
Class IV NI payments do not provide any entitlement to state benefits.
PENSION FOR SELF-EMPLOYED INDIVIDUALS
The basic State Pension in England is currently £230.25 per week.
You can receive the full basic pension after accumulating 30 qualifying years (years that count towards your pension).
If you have fewer qualifying years, you will receive a reduced amount proportionally.
Self-employed individuals in England are not eligible for the additional State Pension (also known as the second state pension).
Therefore, it is highly recommended to set up a private pension plan or invest in savings or investment accounts to create an additional income stream alongside the basic State Pension during retirement.
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