How to register, keep records and claim expenses when you’re a self employed gig worker

In the past five years, the number of UK “gig workers” has tripled to more than 4.5m and almost a quarter find “platform work” via websites and apps such as Uber, Handy, Deliveroo and Gorillas. This includes driving taxis, delivering fast food, courier work, office admin, cleaning, security, repair work and numerous other things. Some people combine different types of gig work, while others do night time and weekend “gigs” to supplement full-time and part-time earnings.

You might be considering gig work or already doing it. Whatever the case, you should know the rules about registration, record keeping, claiming expenses and how much tax you’ll pay. Here are some essential facts.

Do gig workers need to register for Self Assessment?

If your gross income (ie all money you earn) is more than £1,000 in the tax year (6 April to 5 April), you must register for Self Assessment by the following 5 October latest, if you’re registering for the first time or didn’t file a Self Assessment tax return in the previous tax year. Self Assessment is the scheme by which the UK government/HMRC collects Income Tax.

You must tell HMRC about all taxable income, whether paid in cash or electronically. Registering for Self Assessment and filing a tax return each year enables HMRC to work out how much Income Tax and National Insurance contributions (NICs) you owe (paying NICs entitles you to certain state benefits and state pension). You’re allowed to claim tax allowances and tax reliefs to cover “allowable” business expenses.

Need to know! If you’re employed and also do self-employed gig work, you must register for Self Assessment so that you declare your additional earnings to HMRC. Failure to declare taxable income can lead to serious penalties.

How much tax do self-employed gig workers pay?

Self-employed workers (also called sole traders, which includes gig-working freelancers and contractors) get a Personal Allowance, which is non-taxable income. For the 2023/24 tax year it’s £12,570 a year (more if you claim Marriage Allowance or Blind Person’s Allowance; less if you earn £100k-plus).

Self-employed people also pay Class 2 NICs if their annual taxable profits are £6,725 or more and Class 4 NICs if annual profits are £12,570 or more.

Class 2 NICs are £3.45 a week, while Class 4 NICs are 9% on profits between £12,570 and £50,270 and 2% on profits over £50,270.

Need to know! If you get gig work via an intermediary app or a website you’ll normally charged a 10%-15% commission.

What financial records should self-employed gig workers keep?

Businesses (including gig-working sole traders) must maintain accurate financial records, detailing all income and allowable costs. HMRC can charge a penalty if your records are inaccurate, incomplete, unreadable or unavailable (you must keep them for five years).

HMRC can ask to see your financial records, for example, if it’s checking your tax return or conducting an investigation. Maintaining accurate financial records will save you much time when completing your tax returns and give you greater control over your finances.

Many accounting/bookkeeping software and apps are available and their features can save you time and keep your finances better organised. For example, you can record and account for sales receipts for things you buy for your business. Otherwise, you must keep receipts filed safely, as HMRC can ask to see them. Also keep copies of all invoices that you pay or send.

Need to know! Setting up a business bank account is recommended, as then you can separate your business and personal finances. HMRC can ask to see your bank records. Keep safe all bank statements and paying-in slips.

What expenses can you claim?

Gig-working sole traders can deduct a range of allowable expenses from their taxable profits, which helps to lower their tax bills. You cannot claim for personal costs; they must all be “wholly and exclusively” for business. If a cost is made up of business and personal usage (eg your mobile phone), you can only claim for the business proportion of the total cost.

If you operate your business from home some or all of the time, allowable expenses can include a proportion of your phone, broadband, heating and lighting costs, as well as your Council Tax, mortgage interest or rent.

Allowable expenses can include stock, materials, insurance and bank charges, training related to your gig work and office stationery, postage, etc. You may be able to claim allowable expenses for fuel and using your own vehicle, as well as parking, train or bus fares. Claiming mileage allowance can offer a simpler way to cover business-related travel.

Need to know! Our guide – 45 allowable expenses you can claim when you’re a sole trader – could help you to claim all of your allowable expenses.

What expenses can’t you claim?

Many costs are not allowable for tax purposes, such as parking or speeding fines, and you can’t charge for journeys between your home and usual place of work or treat yourself to a new business suit or everyday work clothes.

Childcare costs are not allowable and neither is event hospitality or your daily meal deal (that must come out of your own pocket). Vehicles, machinery and equipment purchases can be claimed as a capital allowance or an allowable expense (dependent on how you record and report your income and expenses to HMRC).     

• Many self-employed gig workers dislike having to complete a Self Assessment tax return. We can help. Self Assessment filing software GoSimpleTax gives you an easier way to take care of your Self Assessment tax return. And to prevent mistakes and make sure you’re claiming all of your tax allowances and expenses, you can get your Self Assessment tax return checked by one of our experts.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.