Go full-time with your business

Guide summary

Give your employer at least one week's notice if you have been in the job for more than a month
Check your contract, as it may require a longer notice period than one week
Take legal advice before giving notice if your plans overlap with your employer's business
Register for Self Assessment if your self-employment income is over £1,000 in the tax year
Send your tax return and pay what you owe by 31 January after the end of the tax year
Keep income and expense records for at least five years after the 31 January deadline
Register for VAT if taxable turnover goes over £90,000 in the last 12 months
Register for VAT within 30 days of the end of the month in which you went over the threshold

Decide whether you are ready

Leaving employment ends your salary, your employer's sick pay and pension contributions and your paid holiday. Your income stops being regular, so test the move before you make it.

You are ready when:

you hold enough in an instant access savings account, kept apart from business money, to cover your essential costs for several months
customers have already paid you for what you plan to sell, or you have contracts or orders that will bring income from the first month
you know your break-even point and how many sales you need each month to cover your essential costs
you have worked out your tax and National Insurance, so you know how much of each payment is not yours to spend
anyone who depends on your income understands that it may be irregular at first

Check your contract, then give notice

Read your employment contract before you tell anyone. It sets your notice period, and it may restrict what you can do afterwards.

You must give at least one week's notice if you have been in the job for more than a month, and your contract may require longer. Giving less than the contract requires puts you in breach, and your employer could take you to court. Give notice in writing if you may need to refer to it later.

Your employer must pay you for any statutory holiday you have not taken when you leave, or you can use it up during your notice. Your employer gives you a P45 when you leave. Keep it, because it shows the pay and tax from your job in that tax year.

Replace what your employer provided

You lose benefits that an employer pays for, and the state does not replace all of them.

Statutory Sick Pay is paid only to employees, so you need your own cover for time off ill. Income protection insurance pays part of your income after a waiting period you choose, and it is usually cheaper to arrange while you are still employed. If anyone depends on your income, consider life insurance as well.

Statutory Maternity Pay is also for employees. If you are self-employed you may qualify for Maternity Allowance, which is paid at up to £194.32 a week for up to 39 weeks in 2026/27, depending on your Class 2 National Insurance contributions.

Your employer's pension contributions end. A personal pension provider claims basic rate tax relief of 20% for you and adds it to your pot, so a payment of £80 becomes £100. If you pay Income Tax above the basic rate you can claim the extra relief on your Self Assessment tax return.

Register with HMRC

You can start trading without registering anything, but you must register for Self Assessment as a sole trader once your trading income passes the registration threshold. Keep records from your first day.

Self Assessment registration deadline

Deadline to register for Self Assessment as a sole trader.

Registration deadline: 5 October following the end of the tax year
Example: Tax year 2024/25: Register by 5 October 2025
Who must register: Self-employment income exceeds £1,000 in the tax year
UTR delivery time: Posted within 10 working days (21 days if overseas)
Activation code: Sent separately by post

Send your tax return and pay what you owe by 31 January after the end of the tax year. Tax is not deducted before you are paid, so put money aside from every payment for your bill.

Know what you will pay

You pay Income Tax and National Insurance on your profit, which is your income minus allowable expenses. National Insurance for the self-employed has two classes.

Self-employed National Insurance rates 2026/27

Class 2 and Class 4 NI rates and thresholds for self-employed individuals.

Self-employed people pay Class 4 National Insurance on profits above £12,570 and may pay Class 2. If your profits are £7,105 or more a year, Class 2 is treated as paid to protect your National Insurance record. Below that, Class 2 is voluntary.

Class 2 NI weekly rate: £3.65 per week
Small Profits Threshold: £7,105 per year (Class 2 voluntary below this)
Class 4 NI main rate: 6% on profits between £12,570 and £50,270
Class 4 NI additional rate: 2% on profits above £50,270
Class 4 Lower Profits Limit: £12,570 per year
Class 4 Upper Profits Limit: £50,270 per year
Tax year: 2026/27 (from 6 April 2026)

How Class 2 works

If your profits are £7,105 or more a year, Class 2 is treated as paid and you do not need to pay it. If your profits are less than £7,105, you do not have to pay anything but you can choose to pay voluntary Class 2 contributions, at £3.65 a week for 2026/27.

Self-employed National Insurance rates (opens in a new tab)

After your first bill, HMRC may also ask for payments towards the next one.

Payments on account thresholds and calculation

When Self Assessment payments on account apply, how much they are and when they are due.

How calculated: Each payment is usually half of the previous year's tax bill, including Class 4 National Insurance if you are self-employed
First payment: 31 January
Second payment: 31 July
Balancing payment: 31 January after the tax year, for any tax still owed
Example: If your 2025 to 2026 tax bill was £3,000, each payment on account towards 2026 to 2027 is £1,500

You do not make payments on account if the tax you owed last year was under £1,000, or if you paid more than 80% of it outside Self Assessment.

Payments on account are based on your estimated earnings, usually what you earned the previous year. If you earn more than estimated, you pay the difference as a balancing payment. If you earn less, you may be able to claim a refund. HMRC charges late payment interest at the Bank of England base rate plus 4 percentage points from the due date.

Payments on account explained (opens in a new tab)

Keep digital records

Keep records of your income and expenses for at least five years after the 31 January deadline for the tax year. If your qualifying income is over a set level, you must also keep digital records and send HMRC quarterly updates through compatible software.

MTD for Income Tax thresholds

Qualifying income levels and start dates by year

From 6 April 2026: Qualifying income over £50,000 in 2024-25
From 6 April 2027: Qualifying income over £30,000 in 2025-26
From 6 April 2028: Qualifying income over £20,000 in 2026-27
Qualifying income: Self-employment and property income before expenses
Who the thresholds apply to: Sole traders and landlords
Exemptions: Exemptions apply, for example if you are digitally excluded
Partners: Partnership income alone does not bring you in
Partnerships: Not yet in MTD; timetable to be set

Find MTD-compatible software (opens in a new tab)

Watch the VAT threshold

VAT registration depends on your taxable turnover, not your profit.

VAT registration: when and how to register

VAT registration threshold, deadlines and how to register.

You must register for VAT if your taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days. You can also register voluntarily if your turnover is lower.

VAT registration threshold: £90,000 taxable turnover over the last 12 months
Deregistration threshold: £88,000
Deadline after going over: Within 30 days of the end of the month in which you went over
Effective date after going over: First day of the second month after you went over the threshold
Expecting to go over in 30 days: Register by the end of that 30-day period; effective from the day you realised
Late registration: VAT is due on sales from the date you should have registered, and you might pay a penalty

Calculating taxable turnover

Taxable turnover is the total value of everything you sell that is not VAT exempt or out of scope. It includes zero-rated, reduced-rated and standard-rated goods and services, goods you hire or loan to customers, business goods used for personal reasons, and goods you barter, part-exchange or give as gifts. It does not include VAT-exempt or out-of-scope sales.

Voluntary registration

You can register for VAT even if your taxable turnover is below the threshold. From your effective date of registration you start charging VAT and reclaiming VAT on items you buy. You can also treat VAT on some pre-registration purchases as input tax:

Goods supplied not more than 4 years before registration, if you still hold them or have used them to make other goods you still hold
Services supplied not more than 6 months before registration

You must hold acceptable evidence, and the purchases must relate to the business's taxable activities.

Registering

You can usually register online with HMRC. You need your business bank account details, details of your annual turnover and an estimate of your taxable turnover for the next 12 months, plus your company registration number and Unique Taxpayer Reference for a limited company, or your National Insurance number and an identity document if you are an individual or partnership. After you register you get a 9-digit VAT registration number, which must appear on your invoices, and your effective date of registration. HMRC signs you up to Making Tax Digital for VAT unless you are exempt.

First VAT return: Usually due one calendar month and 7 days after the end of the accounting period
Charging VAT: From your effective date of registration

Legal basis

Primary legislation and key regulations

Employment Rights Act 1996 Primary 1996 · UK-wide Value Added Tax Act 1994 Primary 1994 · UK-wide SSCBA 1992 Primary 1992 · UK-wide Taxes Management Act 1970 Primary 1970 · UK-wide Income Tax (Trading and Other Income) Act 2005 Primary 2005 · UK-wide WTR 1998 SI 1998 · UK-wide The Income Tax (Digital Obligations) Regulations 2026 SI 2026 · UK-wide

Browse UK legislation legislation.gov.uk

Official guidance

Use Making Tax Digital for Income Tax (opens in a new tab)

GOV.UK

Handing in your notice (opens in a new tab)

GOV.UK · Great Britain

Become a sole trader (opens in a new tab)

HMRC

Pensions for self-employed (opens in a new tab)

www.moneyhelper.org.uk

Notice periods and employment rights (opens in a new tab)

ACAS · Great Britain

Income Protection Insurance guide (opens in a new tab)

www.moneyhelper.org.uk

Self-employment registration and deadlines (opens in a new tab)

HMRC

Self Assessment tax returns (opens in a new tab)

HMRC

Go full-time with your business

Decide whether you are ready

Check your contract, then give notice

Replace what your employer provided

Register with HMRC

Know what you will pay

Keep digital records

Watch the VAT threshold

Legal basis

Official guidance

Related guides in Tax & Finance

Start a business while you're still employed

Set up as a sole trader

Register as self-employed with HMRC

Pay National Insurance when self-employed

Keep business records as a sole trader