Diploma in Professional Accounting
Diploma for Financial Advisers
Member of London Institute of Banking and Finance

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If you are self-employed in the UK, you must pay tax on the money you earn. But the good news is, there are legal ways to reduce your tax bill — and in some cases, you may pay no tax at all. Here’s how to avoid paying tax on self-employed income the right way.

1. Use Your Personal Allowance

Every person in the UK has a tax-free personal allowance (£12,570 for 2025/26). If your total income is below this amount, you will not pay income tax.

2. Claim Business Expenses

Self-employed workers can claim expenses like travel, office costs, tools, and even part of home bills if you work from home. These reduce your profit, meaning you pay less tax.

3. Take Advantage of the Trading Allowance

If your self-employed income is less than £1,000 in a year, you do not need to pay tax or even tell HMRC. This is called the trading allowance.

4. Pay Into a Pension

Money you put into a pension gets tax relief. This helps you save for the future and lowers the amount of income that is taxed today.

5. Use Your Tax-Free Savings

Interest earned in an ISA (Individual Savings Account) is tax-free. Keeping savings here can protect your money from tax.

Final Thoughts

You cannot avoid tax completely if you earn above the limits, but you can use allowances, expenses, and smart planning to reduce what you owe. The key is to stay within the rules so you save money without risking penalties from HMRC.

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