London Freelancer Tax Guide: Self-Assessment, IR35, and National Insurance in 2026

London\'s freelance economy is booming, with over 2 million self-employed workers in the UK capital. But the UK tax system for freelancers differs significantly from employment — you must register for Self-Assessment, pay Class 2 and Class 4 National Insurance contributions, and navigate the complex IR35 rules that determine whether you are genuinely self-employed.

Registering for Self-Assessment with HMRC

You must register with HMRC as self-employed by October 5th following the tax year you started freelancing. The Self-Assessment tax return deadline is January 31st for online filing. Late registration and filing trigger automatic penalties starting at £100 and escalating quickly.

National Insurance for London Freelancers

Self-employed workers pay Class 2 NI (£3.45/week if profits exceed £12,570) and Class 4 NI (9% on profits between £12,570 and £50,270, then 2% above that). On £60,000 of freelance profit, your NI bill is approximately £3,573 — significantly less than the employee NI rate, but still a substantial cost.

IR35 Rules: Inside vs. Outside

IR35 determines whether your freelance contract is genuinely self-employed or disguised employment. If HMRC deems you inside IR35, you pay tax and NI as if you were an employee — eliminating most self-employment tax advantages. Key factors include control over your work, substitution rights, and mutuality of obligation.

Allowable Expenses for London Freelancers

Deductible expenses include: office rent or home office costs (using the simplified flat rate of £26/month for 25-50 hours worked at home), travel to client sites (but not regular commuting), professional subscriptions, software and equipment, accountancy fees, and business insurance. London\'s high costs make expense tracking especially valuable.

VAT Registration Threshold

If your freelance turnover exceeds £90,000 in a 12-month period, you must register for VAT. The Flat Rate Scheme can simplify VAT accounting — you charge clients 20% VAT but pay HMRC a lower flat rate percentage based on your industry. This can result in a small profit on VAT in your first year.

London Cost of Living in Retirement

London retirees need approximately £35,000-£50,000 per year for a comfortable lifestyle (Retirement Living Standards). Housing is the biggest factor — owning your home outright dramatically reduces retirement costs. Consider whether downsizing or relocating outside London could stretch your retirement funds further.