Rules for Freelancers and Contractors in the UK

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Миколаєнко Олена Василівна

Attorney

United Kingdom / England

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Publication date: 07.09.2025

In the modern world, freelancing and contract work are becoming increasingly popular forms of employment, especially in the UK, where UK labour law provides clear frameworks for regulating such relationships. If you plan to start a career as a freelancer or contractor, it is crucial to understand the legal work status to avoid unexpected issues with taxes, rights, and obligations. This article will reveal the main rules, including self-employment, National Insurance, and employer obligations, and advise on how to obtain professional employment advice from Legal Marketplace Consultant. We will help you choose the right algorithm of actions for successful work in the UK, ensuring full compliance with norms.

UK labour law distinguishes worker status depending on the type of contract. For freelancers and contractors, self-employment is predominantly applied, meaning the absence of standard employee rights, such as paid holiday, probation period, or minimum wage. Instead, you have more freedom in choosing projects, clients, and working hours. However, if your status is deemed employed under IR35 rules, full employee rights apply, including PAYE, National Insurance, and dismissal rules as for regular employees. According to 2025 updates, small companies with turnover up to £15 million are exempt from some IR35 checks, easing work for contractors.

The key tool for checking status is the CEST from GOV.UK, which analyses the employment contract, control over work, payment, and other factors. If you are a contractor through a personal service company (PSC), the client is responsible for determining status since 2021, and in 2025, new thresholds for companies are expected, strengthening HMRC checks. Additionally, the government plans a consultation on employment status by the end of 2025, which may introduce new rights for the self-employed, such as in health and safety areas.

It is also important to understand tax aspects. For self-employed, National Insurance includes Class 4 contributions: 6% on profits over £12,570 up to £50,270 and 2% above in 2025-2026. Class 2 contributions are voluntary but recommended for low earners to build state pension. If your income exceeds £90,000, VAT registration is mandatory, adding administrative burden.

Benefits of Self-Employment for Freelancers

• Flexibility in working hours: You set your own schedule, without limits of 48 hours per week like for employees, allowing to balance work and life.
• Ability to work with multiple clients simultaneously, allowing income diversification and reducing risks of dependency on one source.
• Less bureaucracy from the employer, but with the obligation to keep your own tax records, which develops business management skills.
• Potential for higher earnings without a fixed minimum wage, as you set your own rates.

Steps to Register as a Freelancer in the UK

1. Register with HMRC as self-employed if your income exceeds £1,000 per year – this is the basic step for legal work status and avoiding fines.
2. Obtain a UTR number for taxes and check if you need to pay National Insurance Class 4 (6% on profit over £12,570 in 2025-2026).
3. Prepare a job offer or employment contract for each client, specifying payment terms, deadlines, and parties' rights.
4. Consider VAT registration if you expect turnover over £90,000, and set up accounting for annual self-assessment.
5. Enrol in pension contributions, as self-employed do not have automatic enrolment but can benefit from tax relief.

Now let's look in more detail at aspects like probation period or dismissal rules. For contractors, probation period is rarely applied since it is not an employment contract, but the client may set a trial period in the agreement to check skills. Minimum wage (£12.21 per hour from April 2025 for 21+) does not apply to self-employed, so freelancers must ensure competitive payment themselves, considering market rates. Working hours are regulated only by health and safety, without strict limits, but it is recommended not to exceed 48 hours to avoid fatigue.

Employer obligations (or client's) include timely payment and compliance with the Fair Payment Code 2025, protecting freelancers from delays over 30 days. If status is "inside IR35", the client withholds taxes via PAYE, similar to standard employment, and bears responsibility for errors. Employee rights for self-employed are limited but include protection from discrimination and workplace health. In case of disputes, seek employment advice to avoid court costs.

Risks for freelancers include HMRC reclassification of status, which may lead to tax backpayments. For example, if the client controls your work like an employee, IR35 applies. To avoid, clearly document self-employment in contracts. Also, consider liability insurance and professional associations for support.

Frequently Asked Questions

Key Tips for Successful Work

Register on time: Start with HMRC to ensure compliance with UK labour law and avoid penalties for late registration.
 

Check contracts: Every employment contract should clearly define self-employment to avoid PAYE and IR35 issues.
 

Seek employment advice: Contact Consultant for professional guidance to get a personalized plan and minimize risks.
 

Get insured: Arrange professional indemnity insurance to protect against client claims.