Freelancer vs. sole trader

Like sole traders, a freelancer fits under the broad term ‘self-employed’, but while a sole trader is a specific businesses structure registered with HMRC, the term ‘freelancer’ does not refer to any specific legal status. Instead, it refers to the type of work carried out.

As such, not all sole traders fit the definition of a freelancer, and freelancers are not always sole traders. Although the sole trader business structure is the most common structure for freelancers, freelancers may also choose to register as a limited company or partnership instead.

How to become a freelancer

When you first start working for yourself, you will initially be classified as a sole trader. As a sole trader, you will need to register with HMRC to make sure that you pay the correct Income Tax and National Insurance.

You may also need to register for:

• CIS if you are working as a contractor or subcontractor in the construction industry;
• VAT if you have an annual turnover of more than some amounts.

If you register as a partnership or limited company, you will have some additional responsibilities, such as choosing and registering a company name.