IF you’re self employed, you’ll know all too well the dread of handing a big wedge of your hard-earned money over to the taxman.
That’s why you’ll need to know these eight – perfectly legal – tips to slash your tax bill, shared by top money experts – it could save you a whopping £19k.
Our expert guide reveals how you can save money on working from home costs[/caption]
Plus you could save money on your mileage with our top tips[/caption]
There are huge benefits to being self-employed – you get to work your own hours, be your own boss, and build a successful business.
But the biggest downside is having to handle your own tax affairs, work out how much tax you owe, and report it to HMRC.
There were 4.41million self-employed people in the UK between April to June 2025, according to The House of Commons Library.
We all know tax evasion is a crime, but there are ways to legitimately save money.
Every little saving you can make really adds up – so it pays to know how to knock thousands off your tax bill.
The subject of reducing your tax bill has been in the headlines recently after Angela Rayner was quizzed on her tax affairs.
Critics have accused the deputy PM of voting to put up our taxes, while failing to pay enough stamp duty tax on her Hove flat by a massive £40,000.
But there are many ways for hard-working Brits to lower their tax bill and our tips can help you save over £19,600 in a tax year – here’s how.
Pension
Many self-employed people don’t realise they can reduce their tax bill by paying into their pension.
For example, if you have a particularly successful year, then an increase in your income could drag you into a higher tax band.
If you were dragged into the higher rate tax band then you could be forced to pay tax at 40% on any income over £50,271.
But if you put the income you earn over this threshold into your pension then you would pay no tax on it.
Key tax deadlines YOU need to know
YOU may need to file a tax return if you are self-employed and earned more than £1,000 in the last financial year. Here are all the key deadlines you need to know.
October 5, 2025
If you are filing a tax return for the first time then you need to register for Self Assessment by October 5, 2025.
If you register after October 5 then HMRC will send you a letter or email with a different deadline to send your tax return by.
This will be three months from the date on the letter or email.
October 31, 2025
If you want to send in a paper tax return then you need to do so by 11:59pm on 31 October, 2025, or you’ll get a late filing penalty.
December 30, 2025
If you want to pay your Self Assessment bill through your tax code, you must submit it by 11:59pm on December 30, 2025.
If you miss this deadline, you’ll have to pay another way.
January 31, 2026
You need to submit your online tax return by by 11:59pm on 31 January 2026 or you’ll get a late filing penalty.
Plus you need to pay any tax you owe by 11:59pm on January 31, 2026 or you’ll get a penalty.
July 31, 2026
There is a second payment deadline of July 31 if you make payments towards your bill.
These are known as “payments on account”.
Penalties
It’s important to file your tax return on time to avoid being hit with hefty penalties.
If you miss the deadline to file your tax return then you will get an initial £100 penalty.
After three months you will also be hit with daily penalties of £10 a day, up to a maximum of £900.
After six months, a further penalty of 5% of the tax due or £300, whichever is greatest.
After 12 months, you will be hit with another 5% or £300 charge, whichever is greater.
For example, if you earned £55,000, you would pay 40% tax on £4,730 of that.
This would give you £42,457 a year of take home pay (assuming no deductions), and a total income tax bill of £9,432.
Instead, if you put that £4,730 into a pension, you would have take-home pay of £39,619 and pay £7,540 income tax.
Even though your take-home pay is £2,838 lower, you’ll have saved £1,892 in tax.
Robert Salter, tax expert at Blick Rothenberg, said: “Topping up your pension clearly remains a prime way for individuals to potentially reduce their tax bill and equally importantly save for their retirement.
“It is always also important to remember that as a society, there are clear reasons to actually believe we are not saving enough for our retirements.”
When you pay into your pension you also benefit from tax relief, which is when the Government boosts your pension savings.
The relief is provided at your marginal tax rate, so if you pay income tax at 20% then you will get the relief at this rate too.
Saving: £1,892
Child benefit
Robert adds that pension contributions can be particularly beneficial for people who are earning between £60,000 and £80,000 a year.
I shaved £27,312 a year off my tax bill by using key allowances and loopholes
LEWIS Crompton saves £27,312 a year on his tax bill by claiming key tax allowances and exemptions.
The 35-year-old millionaire, from King’s Lynn, trades stocks online and manages several rental properties.
He claims £312 a year in tax relief on his work expenses, including his work phone.
“It really does all add up,” he said. “I have two mobile phones, one which is personal, one which is just for work.
“That means I can run my phone fully through my business.”
He also claims back the mileage on journeys he makes for work.
He said: “I check my odometer before each trip and then track it on my phone. I then add it to the invoice that I do monthly.”
Lewis does around 20,000 miles a year and claims back around £7,000 in tax relief.
He also pays himself in dividends to avoid being hit with income tax.
Lewis said: “I pay myself the maximum tax free allowance for income in the UK and everything on top of that becomes a dividend.
“By doing this I probably save around £20,000 a year.”
This is because once you or your partner earn more than £60,000 a year the amount of child benefit you get starts to decrease.
Once your earnings go over £80,000 a year you lose the benefit altogether.
Child benefit is worth £43.30 a week for two children.
So if you earned £80,000 but reduced your income to below £60,000 a year and qualified for the benefit you would be £2,251.60 better off a year.
Saving: £2,251.60
Pay your partner
If your partner helps you with your business from time to time then it could be a good idea to pay them for their work.
Robert Salter said: “Many self-employed people will have their spouse or partner involved in the business to some extent – even if this is simply taking bookings for call outs or handling the admin and record-keeping.”
Although both salaries would be subject to tax, if the spouse earns less than the self-employed taxpayer then it can be beneficial for them also to pay tax.
Thinking about when you pay yourself could save you thousands in tax[/caption]
This is because the tax burden of the whole family can end up being lower than if all the income was in the name of the self-employed person.
For example, if you earn £62,840 a year then you would pay £12,456.40 in income tax a year.
But if you paid your spouse £12,570 a year or less then they do not have to pay tax on this money.
Your income would fall to £50,000 a year and you would pay £10,478.60 in income tax – saving you £1,977.80.
Saving: £1,977.80
Working from home allowance
If you work from home all or part of the time then you could be missing out on an underused tax break.
You can only claim for costs that come with your work, such as business phone calls, gas and electricity for where you work in the home.
But you can’t claim for things you use for your business and in personal life, such as rent or broadband.
For example, under the simplified rules you could claim up to £10 a month against your self-employment income if you use your home for between 25 and 50 hours of business a month.
If you work from home between 51 and 100 hours a month then you could get £18.
Meanwhile, if you work for more than 101 hours a month from home then you could get £26 a month – or £312 a year.
If the amount of time you work at home varies by month then you can claim the relevant amount for that month.
You can claim for your actual expenses instead of the flat rate sums but this is more complicated to do and you need proper calculations to prove your costs.
Morgan Davies, managing director of Prime Accountants Group, said: “You can claim tax relief on £6 a week to cover electricity costs such as powering your computer and lighting your workspace.
“If you’ve converted your garage into an office and it’s only ever used for business, the cost of converting it, furnishing it with a desk, chair and heater and running it could potentially be claimed through your business and create tax relief.”
He adds that people often miss out on claiming for IT equipment.
He said: “They might buy a new computer out of their own pocket or use their personal laptop, when actually that should be a business expense with tax relief.”
Saving: £312
Claim for your car
If you drive a car or van for work then you could claim tax relief on your mileage.
You can claim 45p tax relief on every mile you do for the first 10,000 miles a year of business journeys.
If you travelled this distance in a year you would get £4,500 in tax relief a year.
If you drive more than 10,000 miles then you can claim 25p tax relief per mile.
While tax avoidance is illegal, there are ways you can cut your bill[/caption]
Plus you can get an additional 5p per mile in relief if you carry a passenger.
Morgan Davies explains: “The 45p per mile more than covers the petrol or diesel and it contributes towards the running cost of the vehicle, the insurance and the maintenance.
“Your business can pay you that money and the business saves the tax, because it’s a legitimate cost for the business.”
You can log the number of miles you do and add reminders to report your mileage using apps including driversnote and Fuelio.
To use them simply download these apps from the app store and create an account.
Don’t claim for any personal mileage that you do, even if you use the same vehicle for business purposes.
As with working from home tax relief, you can also claim based on the actual cost you have incurred, rather than the fixed sums.
But this requires you to figure out how much you use your vehicle for business vs personal journeys and log them.
Saving: £4,500
Marriage tax allowance
One way to cut your tax bill is to team up with your spouse or civil partner.
Marriage tax allowance is a special tax break for couples that can reduce their combined tax bill by £252.
It lets you transfer some of your unused personal allowance to your partner to reduce their tax bill.
Every worker has a personal allowance, which is the amount you can earn every financial year before you need to pay tax.
For the current tax year it is set at £12,570.
Workers including hairdressers, builders, plumbers and handymen can all benefit[/caption]
If you earn below this amount then you can transfer up to £1,260 of this allowance to your husband, wife or civil partner.
To do so your partner must earn between £12,571 and £50,270.
David Little, financial planning partner at wealth management firm Evelyn Partners, said: “It may not seem game changing money, but over time it adds up.
“You can backdate claims for up to four years, meaning a potential £1,000 windfall.”
Saving: £252
Think about when you pay yourself
Workers who are self-employed and have set up their own limited company should think about when they pay themselves to avoid a tax bill.
This is because any dividend income they take from the business is only subject to income tax when it is taken out of the business.
Dividends are a portion of a company’s profits and you get them if you own shares in the business.
For example, if you intend to pay yourself £80,000 over the next 18 months or so then you should think about when you take the payments.
It may be better to take £40k in one UK tax year and £40k in the next tax year – rather than taking out the full £80,000 as a lump sum.
If you take the money out in one tax year then you only get a personal tax allowance of £12,570.
But if you withdraw the money over two tax years then you get two personal tax allowances – which add up to £25,140.
This would save you £8,460.
Saving: £8,460
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