In the last five years, the number of gig workers in the UK has more than tripled, reaching over 4.5 million. This increase reflects the growing popularity of flexible, app-based work available through platforms like Uber, Handy, Deliveroo, and Gorillas. These platforms offer opportunities across various sectors, including delivery, taxi driving, cleaning, admin work, repairs, and more. While some people engage in gig work full-time, many use it to top up income from other jobs or to fit around study, parenting, or other responsibilities.
Becoming a gig worker means becoming self-employed. That carries responsibilities—especially when it comes to taxes. Understanding how to register, keep your records, and claim legitimate business expenses will make managing your income smoother and keep you compliant with HMRC regulations.
Understanding Your Employment Status
When you work in the gig economy, you are generally classed as self-employed. This means you are not on PAYE, and it’s your responsibility to declare and pay any tax and National Insurance due on your earnings. Even if you’re also employed elsewhere, your self-employment is considered a separate income stream. If your total income from self-employment is more than £1,000 in a tax year (6 April to 5 April), you’re legally required to register for Self Assessment with HMRC.
This must be done by 5 October following the end of the tax year in which your earnings exceeded £1,000. When you register for Self Assessment, HMRC will issue a Unique Taxpayer Reference number (UTR), which you’ll use whenever you interact with HMRC regarding your self-employed income. From then on, you’re required to file a Self Assessment tax return each year.
What Is Self Assessment?
Self Assessment is the method HMRC uses to collect Income Tax from individuals whose income is not taxed at source. As a gig worker, this includes you. Filing a Self Assessment tax return involves declaring your income and claiming any allowable business expenses. HMRC then calculates how much Income Tax and National Insurance you owe.
This system operates on trust, but HMRC has the power to investigate anyone it suspects of under-declaring income or over-claiming expenses. For this reason, it’s essential to be accurate and honest in your tax return and to keep thorough records of your income and costs.
When and How to Register
To register for Self Assessment, you need to sign up through the HMRC website. You’ll be asked to provide basic information such as your name, date of birth, National Insurance number, and address. You’ll also need to describe your business activity—for example, delivery driving or cleaning services. Once registered, you’ll receive your UTR in the post within a few weeks.
After you’ve registered, you must submit a tax return for every year you earn more than £1,000 from self-employment. The online deadline for submitting a return is 31 January following the end of the tax year. This is also the date by which you must pay any tax and National Insurance due.
Income Tax Rates and Thresholds
As a self-employed individual, you can earn up to a certain amount before you start paying Income Tax. For the 2023/24 tax year, the Personal Allowance is £12,570. This means that if your total income from all sources is less than this, you won’t pay any Income Tax. If you earn more, you’ll be taxed as follows:
- Basic rate: 20% on income between £12,571 and £50,270
- Higher rate: 40% on income between £50,271 and £125,140
- Additional rate: 45% on income above £125,140
Keep in mind that your tax rate applies only to the portion of your income that falls within each band. So, if you earn £60,000, the first £12,570 is tax-free, the next £37,700 is taxed at 20%, and the remaining £9,730 is taxed at 40%.
National Insurance Contributions
Self-employed individuals must also pay National Insurance if their profits exceed certain thresholds. There are two types you need to be aware of:
- Class 2: Payable if your profits are £6,725 or more per year. This is a flat rate of £3.45 per week.
- Class 4: Payable if your profits are £12,570 or more. You’ll pay 9% on profits between £12,570 and £50,270, and 2% on profits over £50,270.
These contributions are calculated as part of your tax return and paid alongside your Income Tax.
Understanding Platform Commissions
Many gig workers operate through digital platforms, which typically take a percentage of your earnings as a commission. This fee is often between 10% and 15%, depending on the platform. While these deductions reduce your take-home pay, they are considered an allowable business expense and can be deducted from your gross income when calculating your taxable profit.
It’s important to keep track of how much each platform deducts. This will help you calculate your total income accurately and ensure you claim all possible deductions.
Importance of Record-Keeping
As a self-employed person, you’re legally required to keep records of your income and expenses. These records form the basis of your tax return and are your first line of defence if HMRC queries your figures or investigates your affairs.
You must keep records for at least five years after the 31 January submission deadline of the relevant tax year. That means for the 2023/24 tax return due in January 2025, you must retain your records until at least January 2030.
Types of Records to Keep
Here’s what you should be documenting throughout the year:
- All payments received from your gig work, including cash and electronic payments
- All business-related expenses
- Invoices sent to clients or received from service providers
- Receipts for equipment, tools, and services
- Bank statements showing business-related transactions
Keeping digital records is allowed and often more efficient. Many gig workers use accounting apps to scan receipts, track mileage, and generate invoices. These tools help you stay organised and make tax filing easier.
Using a Business Bank Account
Although it’s not a legal requirement, opening a separate business bank account is highly recommended. Keeping your business and personal finances separate makes it much easier to track your income and expenses. It also simplifies things if HMRC ever asks to see your bank records during an enquiry.
All transactions in your business account should relate solely to your gig work. Use this account for receiving payments, buying equipment, paying for travel costs, and any other business-related activity. This clear separation is helpful when completing your Self Assessment return and reduces the risk of errors.
Avoiding Common Mistakes
Many new gig workers make avoidable errors that lead to fines or higher tax bills. Common mistakes include failing to register in time, underreporting income, and not keeping adequate records. Some also miss out on legitimate expense claims because they don’t understand what qualifies or lose receipts that serve as evidence.
Keeping an organised system for tracking income and expenses, registering early, and setting aside time each month for admin can go a long way toward staying compliant and avoiding costly errors.
Planning Ahead for Tax Bills
Unlike employees whose tax is deducted at source through PAYE, self-employed individuals are responsible for calculating and paying their tax themselves. This means you need to plan ahead and set aside money throughout the year. A good rule of thumb is to save around 25% to 30% of your earnings for tax and National Insurance.
If your tax bill is over £1,000, HMRC will ask you to make payments on account. These are advance payments towards your next year’s tax. You’ll need to pay half by 31 January and the other half by 31 July. Many first-time self-employed workers are surprised by this and end up short of cash. Planning ahead avoids that problem.
When to Get Help
Although it’s possible to manage your tax affairs independently, many gig workers find value in seeking help from professionals or using tools that simplify the process. This can be especially useful if you have multiple income sources, complex expenses, or you’re unsure about the rules.
While hiring an accountant is one option, using online filing software designed for gig workers can also help ensure accuracy and save time. These tools guide you step-by-step through the Self Assessment process, calculate your liabilities, and can even flag errors before submission.
Staying Informed
The tax rules for self-employed individuals are subject to change, especially as the government continues to reform the tax system. Staying informed about changes to thresholds, allowances, and filing requirements is essential. Subscribing to HMRC updates, reading trusted sources, and checking your tax account online regularly can help you keep up to date.
Claiming Expenses as a Self-Employed Gig Worker
Claiming business expenses correctly is one of the most effective ways to reduce your tax bill as a self-employed gig worker in the UK. When you operate as a sole trader, your taxable income is your total income minus your allowable business expenses. This means the more legitimate costs you can claim, the less tax you’ll pay. However, understanding which expenses qualify and how to record them is essential to ensure your tax return is accurate and compliant with HMRC rules.
What Are Allowable Business Expenses?
Allowable expenses are costs that are incurred wholly and exclusively for the purpose of running your business. These are different from personal costs and cannot be claimed if they’re not related to your self-employment activities. HMRC is strict about this rule, so you must be careful not to include everyday personal spending when claiming business deductions.
If a cost has both business and personal use, such as a mobile phone or broadband connection, you can only claim the proportion that relates to business. Estimating this proportion reasonably and keeping supporting evidence is key to ensuring your claim is valid.
Common Allowable Expenses for Gig Workers
There are many types of costs that can be claimed as allowable business expenses, depending on the type of gig work you do. Below are some of the most commonly claimed categories:
Vehicle and Travel Costs
Many gig workers rely on vehicles to do their jobs. If you use your own car, motorcycle, or bike for business purposes, you may be able to claim expenses such as:
- Fuel
- Insurance
- Repairs and maintenance
- Road tax and MOT
- Vehicle lease or hire charges
- Parking fees (not fines)
- Breakdown cover
Alternatively, you can choose to use the simplified mileage rate allowed by HMRC. This is currently 45p per mile for the first 10,000 business miles and 25p per mile thereafter. This method is easier for record-keeping and doesn’t require you to track individual expenses like fuel or insurance. You cannot switch methods mid-year, so choose the one that works best for your situation.
You can also claim travel costs such as train, bus, or taxi fares, provided these journeys are necessary for your business. Journeys between your home and a regular place of work are not allowable.
Phone, Internet, and Technology
Gig workers often depend on mobile phones and the internet to receive job requests, communicate with customers, and navigate to work locations. If your phone and internet are used partly for business, you can claim a fair proportion of these bills. For example, if you use your phone 60% for business and 40% for personal use, you can claim 60% of the total cost.
If you buy equipment such as a smartphone, laptop, GPS, or accessories needed for your work, these can also be claimed as expenses. Depending on the cost and how you account for expenses, they may be treated as capital allowances instead.
Work-Related Supplies and Equipment
Items you purchase specifically to carry out your work can be deducted. These may include:
- Tools and materials
- Safety clothing or uniforms (not regular clothing)
- Protective gear
- Bags, boxes, or packaging materials
If you use consumables in your line of work, such as cleaning products, stationery, or printer ink, these are also claimable.
Home Office Costs
If you use part of your home to run your gig work, such as for administrative tasks, you can claim a proportion of your household expenses. This includes:
- Rent or mortgage interest
- Council tax
- Heating and lighting
- Water rates
- Broadband and phone bills
There are two ways to calculate your home office claim:
- Flat rate method: HMRC allows a simplified expense based on the number of hours you work from home per month.
- Proportional method: You calculate the percentage of household bills based on the number of rooms used and the time spent working.
You should choose the method that provides the most accurate and beneficial result while maintaining evidence to support your claim.
Training and Development
If you take courses or attend training sessions that directly relate to your existing gig work, the costs are deductible. Examples include:
- Online tutorials or webinars
- Certification renewal for driving or delivery
- Courses on improving business skills or safety practices
However, training for a new skill or trade that is not directly related to your current self-employed work is not allowable.
Advertising and Marketing
Promoting your gig work is often necessary to gain clients or increase earnings. Allowable advertising costs include:
- Printing flyers or business cards
- Website design and hosting
- Social media ads or boosts
- App listings or premium subscriptions that improve visibility
Marketing your gig services is a legitimate cost and can be claimed in full, provided the expense is exclusively for business promotion.
Bank Fees and Financial Charges
Bank charges on your business account, including monthly fees and overdraft interest, can be claimed. If you use accounting software or pay for financial advice related to your business, those fees are also deductible.
Interest on loans used entirely for business purposes is allowable. However, if a loan is partly used for personal reasons, only the business portion can be claimed.
Keeping Good Records of Expenses
To ensure your expense claims are accepted by HMRC, you must keep detailed and accurate records. This means saving all receipts, invoices, and statements that prove the expense occurred and was for business purposes. The more organized your system, the easier it will be to complete your Self Assessment tax return.
Types of Records to Maintain
- Receipts for purchases and payments
- Mileage logs or fuel receipts
- Invoices issued and received
- Bank and credit card statements
- Phone and utility bills with business usage estimates
- Spreadsheets or accounting app records
These records must be kept for five years after the 31 January deadline following the end of the tax year. So, if you file your 2023/24 return by 31 January 2025, you should retain all relevant records until at least 31 January 2030.
Digital Record-Keeping
Digital tools make it easier than ever to track expenses. Many apps allow you to scan receipts, generate expense reports, and link directly to your bank accounts. This can help reduce errors and save time during tax season.
You don’t have to use software, but it’s highly recommended, especially if your gig income comes from multiple sources. Having a clear digital record not only makes tax filing easier but also protects you in the event of an HMRC enquiry.
Understanding Mixed-Use Expenses
Some business expenses also serve personal purposes. For example, your mobile phone, broadband, or even your car may be used partly for business and partly for your own personal needs. In these cases, you must work out the proportion of the cost that relates to your business.
How to Calculate Business Proportion
- Use a reasonable method such as tracking usage for a sample week or month.
- Document your working hours and how your resources are used during those times.
- Apply the percentage to the total bill. For example, if 70% of your phone use is for work, you can claim 70% of the monthly cost.
This method can be applied to other shared costs like home electricity, rent, and transport. Just be consistent and ensure your calculations are backed by logs or usage data.
Expenses You Cannot Claim
It’s important to know what doesn’t count as an allowable expense to avoid claiming something that may be rejected by HMRC. Common disallowed costs include:
- Parking and speeding fines
- Daily meals or takeaway food while working
- Regular clothing, even if you only wear it for work
- Journeys between home and a regular workplace
- Childcare costs
- Personal entertainment, gifts, or hospitality
Although some of these costs may feel related to your work, HMRC only allows expenses that are strictly for business purposes.
Capital Allowances
If you buy a significant item for your business, such as a vehicle or expensive equipment, you may be able to claim capital allowances. This lets you deduct some or all of the cost over time. Capital allowances can be claimed for:
- Vans, motorbikes, or bicycles
- Computers or tablets
- Specialist tools or machines
You can choose to claim the Annual Investment Allowance, which lets you deduct the full value of qualifying items in the year of purchase, up to a certain limit. Alternatively, you may spread the deduction over several years, depending on the asset’s depreciation.
Filing Your Tax Return and Managing Your Self-Employed Finances
After registering as a self-employed gig worker and learning how to track and claim business expenses, the next major task is filing your Self Assessment tax return accurately and on time. This process involves gathering all your income and expenses, completing the correct sections of the return, and calculating the tax and National Insurance Contributions (NICs) you owe.
If done correctly, it ensures you pay only what is necessary, helping you avoid penalties or overpayments. We will walk through the full process of preparing, filing, and paying your tax return, including handling corrections, understanding payments on account, and building good long-term financial habits.
When and How to File Your Tax Return
If you are self-employed in the UK, you must file a Self Assessment tax return for every tax year in which you earn more than £1,000 from self-employment. The tax year runs from 6 April to 5 April the following year. The deadline for filing your tax return online is 31 January following the end of that tax year.
For example, for the 2023/24 tax year (ending 5 April 2024), the online submission deadline is 31 January 2025. The same date is the deadline for paying any tax and NICs due for that year. To file your return online, you need a Government Gateway account. You can register for one when you first sign up for Self Assessment. After logging in, you’ll be guided through the process step by step, and you can save your progress and return to it later.
Information You Need to File
Before you start your tax return, gather the following information:
- Your Unique Taxpayer Reference (UTR)
- Your National Insurance number
- Total income from all sources, including employment and self-employment
- Records of all business expenses
- Details of any tax-deductible items such as pension contributions or charity donations
- Bank interest or dividend income
- Student loan or child benefit details if applicable
Once you’ve collected this data, you’ll enter it into the appropriate sections of your tax return. If you are self-employed, you will complete the Self Employment section, which asks for your income, expenses, and resulting profit.
Declaring Your Income and Expenses
You must report your total income from all gig work. This includes:
- Payments received through platforms like Uber, Deliveroo, or Handy
- Cash payments from clients
- Tips and bonuses
- Any other form of payment for services rendered
Next, you will list your allowable expenses. These should be clearly itemised by category, such as travel, equipment, or phone bills. HMRC provides a breakdown of categories, and you should place each expense into the most relevant one.
After subtracting your total expenses from your income, you’ll be left with your profit. This is the amount on which your Income Tax and Class 4 NICs are calculated. Class 2 NICs, which are paid at a flat rate, are also added during this process if your profits are over the relevant threshold.
Using the Simplified Expense Method
HMRC offers a simplified way to claim some types of expenses, such as using your vehicle or working from home. If you choose to use this method, you won’t need to record individual receipts for those costs. Instead, you use a flat rate based on usage, such as the number of miles driven or hours worked from home.
This method saves time and is acceptable for most sole traders, but it may not provide the most accurate or highest deduction compared to claiming actual costs. Decide early in the tax year which method suits your needs best.
What Happens After You File
After submitting your tax return online, you’ll immediately receive a calculation of how much tax and NICs you owe. This includes:
- Income Tax based on your profit and tax bands
- Class 2 NICs if profits exceed £6,725
- Class 4 NICs if profits exceed £12,570
You must pay the amount due by 31 January. If your total tax bill is more than £1,000, you’ll also need to make advance payments toward the next year’s bill, called payments on account.
Understanding Payments on Account
Payments on account are advance payments toward your future tax bill. HMRC requires these if your total bill (excluding Class 2 NICs) is over £1,000. They are intended to spread your tax payments over the year.
Each payment is 50% of your current year’s tax bill:
- The first payment is due by 31 January
- The second is due by 31 July
So if your tax bill for 2023/24 is £2,000, you’ll pay £2,000 by 31 January 2025 (including your first £1,000 payment on account for 2024/25), and a second £1,000 by 31 July 2025. If your earnings drop in the following year, you can apply to reduce your payments on account. If you overpay, HMRC will refund the extra once you submit your next return.
What to Do if You Make a Mistake
Mistakes can happen, especially if you’re filing a return for the first time. If you realise you’ve made an error, don’t panic. You can usually correct it without penalty.
You have 12 months from the submission deadline to make amendments. For example, the deadline to amend your 2023/24 return is 31 January 2026. To correct your return, log into your HMRC account, find the submitted return, and choose the option to amend it.
If you miss the correction window or the error leads to underpaid tax, you may face interest or penalties. In this case, it’s best to contact HMRC and explain the situation. Being proactive and transparent can reduce penalties or lead to a more favourable outcome.
Penalties and Late Filing Charges
Failing to file your tax return or pay your tax on time can result in penalties. Here’s what to expect if you miss deadlines:
- £100 late filing penalty if your return is up to 3 months late
- Daily penalties of £10 per day if the return is over 3 months late, up to 90 days
- Additional penalties at 6 and 12 months based on your tax owed
- Interest on late payments
To avoid these issues, set reminders and aim to file early. Filing ahead of the deadline allows time to resolve any problems and avoids last-minute stress.
Record-Keeping and Evidence
You are legally required to keep all records that support your tax return. This includes:
- Income records (e.g., invoices, payment confirmations, bank statements)
- Expense receipts and logs
- Vehicle mileage records
- Utility bills and shared usage calculations
These documents must be kept for at least five years from 31 January following the end of the tax year. That means records for your 2023/24 return should be kept until at least 31 January 2030. Storing your records digitally is acceptable, and many gig workers find apps or cloud-based folders useful for staying organised.
Separating Personal and Business Finances
Using a separate bank account for your business activities is not mandatory but is strongly recommended. It helps keep your transactions clean and makes it easier to track income and expenses.
This is especially useful when calculating tax and if HMRC ever asks for bank records. Keeping business funds separate also helps you manage your cash flow better and avoid spending money earmarked for tax payments.
Building a Financial Safety Net
As a gig worker, your income can vary month to month. To reduce financial stress, it’s a good idea to create a financial buffer. This includes:
- Saving monthly for your tax bill (set aside 25–30% of income)
- Building an emergency fund covering at least 2–3 months of expenses
- Keeping track of upcoming deadlines and payments
Having savings and a system in place gives you flexibility during slow periods or in case of unexpected costs.
Budgeting for Tax and NICs
Without an employer to deduct tax for you, budgeting becomes your responsibility. Use a percentage-based system where you set aside part of every payment for future tax and NIC obligations. For example:
- Set aside 20–25% of income for Income Tax
- Add an additional 5–10% for NICs, depending on your earnings
You can keep these funds in a separate savings account so they’re not accidentally spent.
Planning for the Long Term
Self-employed gig workers should consider how their current income strategy fits into their long-term goals. While flexibility is a major benefit of gig work, it also means no automatic pension contributions, sick pay, or holiday pay. Consider setting up a personal pension plan to build retirement savings. Look into income protection insurance or savings goals to cover gaps in work due to illness or changes in platform rules.
It’s also wise to keep up with changes to self-employment regulations, tax thresholds, and digital filing requirements. Staying informed helps you adapt to changes and remain compliant. In future updates or guides, we can explore specific tax relief options, digital record-keeping tools, or alternative ways gig workers can boost financial resilience and efficiency.
Conclusion
Navigating the world of self-employment as a gig worker in the UK comes with both freedom and responsibility. Whether you’re driving, delivering, cleaning, fixing, or freelancing, understanding your obligations to HMRC and your rights as a sole trader is crucial to building a sustainable and financially sound career.
You’ve now seen the importance of registering for Self Assessment when your income exceeds £1,000 in a tax year. Filing tax returns might seem daunting, but getting to grips with deadlines, income thresholds, and tax bands can help you avoid costly penalties. Paying the right amount of tax and National Insurance also ensures your access to benefits and entitlements in the future.
Keeping good records isn’t just a legal requirement, it’s a smart business practice. Whether you use digital tools or stick with a manual system, tracking your income, logging your expenses, saving invoices and receipts, and maintaining accurate mileage records can save you time and money. Creating a clear separation between your business and personal finances such as through a dedicated business bank account makes your accounting even easier and more transparent.
Claiming legitimate business expenses is one of the most powerful ways to lower your taxable profit. From vehicle costs and internet usage to home office expenses and business tools, every allowable deduction counts. But it’s just as important to know what you can’t claim like fines, personal clothing, and meals, so you stay compliant and avoid triggering an investigation or rejection by HMRC.
Finally, completing your Self Assessment return correctly and on time is the last piece of the puzzle. Knowing how to handle payments on account, reporting profits, and correcting mistakes ensures you remain in control of your finances. As your income grows, understanding the thresholds for additional tax or VAT registration will help you stay ahead of changing obligations.
Self-employment offers flexibility and independence, but it comes with its own set of rules and best practices. Staying informed, organised, and proactive will help you avoid problems, take full advantage of tax reliefs, and make confident decisions as your gig work evolves. Whether you’re just getting started or managing multiple platforms and clients, understanding your responsibilities is the first step toward success.