Do self employed people get a tax code?

At Towerstone Accountants we provide specialist personal tax services, for self employed, and individuals across the UK. This article has been written to explain Do self employed people get a tax code, in clear practical terms, so you understand how personal tax and Self Assessment rules apply in real situations. Our aim is to help you stay compliant, avoid costly mistakes, and make confident tax decisions.

This is a question I am asked surprisingly often and usually by people who are new to self employment or who have recently moved away from employment. It often comes up when someone looks at a payslip from a previous job or logs into their HMRC account and notices that there is no tax code showing against their self employed income.

From my experience as a chartered accountant specialising in Self Assessment the short answer is no self employed people do not usually have a tax code in the way employees do. However like many things in tax the full answer is more nuanced and understanding that nuance helps people avoid confusion mistakes and unnecessary worry.

In this article I want to explain clearly what tax codes are who they apply to how tax works for self employed people and why the system is structured this way. I will also cover situations where a self employed person might still see a tax code and what to do if something does not look right.

What a tax code actually is

Before answering whether self employed people have a tax code it helps to understand what a tax code is designed to do.

A tax code is a mechanism used within the PAYE system. Its purpose is to tell an employer how much tax to deduct from an employee’s wages before they are paid. It reflects things like the personal allowance adjustments for benefits or underpayments and sometimes multiple sources of income.

In simple terms a tax code allows HMRC to collect tax in real time through wages or pensions. It is not a general tax identifier and it is not used to calculate final tax positions for everyone.

This is why the distinction between employment and self employment matters so much.

Why self employed people do not usually have a tax code

Self employed people are not taxed through PAYE. There is no employer deducting tax at source and there is no regular payroll calculation taking place. Instead tax is assessed after the end of the tax year through the Self Assessment system.

From my experience this is where confusion often arises. People expect the tax system to work the same way regardless of how they earn income. In reality the method of collection is different.

For self employed individuals tax and National Insurance are calculated based on profits rather than income received in a pay period. You report your figures after the tax year ends and HMRC calculates what is due. You then pay that amount usually by 31 January and in some cases 31 July as well.

Because there is no ongoing deduction process there is no need for a tax code.

How tax is collected from self employed people instead

Rather than using a tax code HMRC relies on Self Assessment to calculate tax liabilities for self employed people.

Each year you submit a tax return showing your income allowable expenses and resulting profit. HMRC then calculates income tax and National Insurance based on those figures.

In my opinion this system gives flexibility but it also places more responsibility on the individual. There is no automatic correction during the year. If your records are wrong your tax bill will be wrong. This is why accurate bookkeeping matters so much for self employed people.

National Insurance and self employment

Another area of confusion is National Insurance.

Employees pay Class 1 National Insurance through payroll. Self employed people pay Class 2 and Class 4 National Insurance through Self Assessment.

Again there is no tax code involved. These amounts are calculated after the year ends based on profits and included in the final tax bill.

This is often a surprise for people who are newly self employed because nothing is deducted during the year. The first tax bill can feel large if no money has been set aside.

Situations where a self employed person might still have a tax code

Although self employed income itself does not have a tax code there are situations where a self employed person may still have one.

The most common example is where someone has more than one source of income.

If you are self employed but also work part time as an employee your employment income will still be taxed under PAYE and will still have a tax code. The self employed income sits separately and is dealt with through Self Assessment.

Similarly if you receive a pension that income will usually have a tax code even if you are also self employed.

In some cases HMRC may adjust a tax code on an employment or pension to collect underpaid tax from previous years including tax arising from self employment. This can make it appear as though self employed income is being coded when in reality HMRC is simply using PAYE as a collection method.

From experience this can cause confusion and should always be reviewed carefully.

What if HMRC issues a tax code and I am fully self employed?

Occasionally HMRC systems issue tax codes where they are not appropriate. This usually happens where HMRC believes there is PAYE income or where historic information has not been updated.

If you are fully self employed and see a tax code you should not ignore it. It does not necessarily mean tax is being deducted incorrectly but it does mean something needs checking.

In practice this usually involves reviewing your HMRC online account or speaking to your accountant to confirm what income HMRC thinks you have and why the code exists.

Why understanding this matters in practice

In my experience misunderstandings about tax codes often lead to practical problems.

Some self employed people assume tax is being dealt with automatically when it is not. Others panic because they cannot see a tax code and assume something is wrong. Both situations can lead to missed payments or unnecessary stress.

Understanding that self employment operates outside the PAYE system helps people plan properly. It encourages setting aside money for tax keeping good records and reviewing figures regularly rather than waiting for a surprise bill.

The role of an accountant in all of this

This is where having an accountant makes a real difference.

One of the first things I explain to new self employed clients is that the absence of a tax code does not mean the absence of tax. It simply means the timing of payment is different.

An accountant helps forecast tax bills review profits during the year and ensure nothing is missed. They also deal with HMRC if tax codes appear incorrectly or if PAYE adjustments are made that do not reflect the true position.

From experience clarity early on prevents problems later.

Key points to takeaway

Self employed people do not usually have a tax code because they are not taxed through PAYE. Their tax is calculated after the end of the tax year through Self Assessment based on profits rather than pay periods.

Where a tax code does appear it is usually linked to another source of income or HMRC using PAYE to collect tax owed. These situations are common but should always be checked to ensure they are correct.

In my opinion understanding how the system works removes a lot of unnecessary anxiety. If you are unsure about your position or something does not look right getting advice early makes everything far easier to manage.

You may also find our guidance on How do I register as self employed with HMRC, and Do I need a business bank account if I am self employed, helpful when reviewing related personal tax questions. For a broader overview of Self Assessment deadlines, reporting, and obligations, you can visit our self assessment guidance hub.