Moving from employment to self‑employment in 2026 is an exciting step, but it also brings a new set of legal and compliance responsibilities that begin on the very first day of trading, not when your first tax return becomes due.
More people than ever are choosing to work for themselves, whether through freelancing, consulting, skilled trades, or small home‑based businesses. But the transition from PAYE employment to running your own business is a significant shift, and understanding your obligations early is essential.
To help new sole traders begin with confidence, Sean Farnell, Partner at Burgis & Bullock, explains the key responsibilities that anyone making this transition must be aware of in 2026. “When you become self‑employed, you must tell HMRC – even if you still have employment income alongside it,” says Sean. “By switching from PAYE to self‑employment, people often underestimate how quickly responsibilities kick in. Registering early and understanding the deadlines avoids unnecessary problems.
“You must register for Self-Assessment by 5 October following the end of the tax year in which you started trading (unless you are earning less than £1,000 per annum). For example, if you begin working for yourself at any point between 6 April 2025 and 5 April 2026, you must register by 5 October 2026. Missing this deadline can result in penalties and interest charges, so acting promptly is vital.”
One of the biggest adjustments is understanding that as an employee, insurance is handled by your employer, but as a self‑employed individual you are responsible for sourcing your own protection. Depending on the nature of your work, this may include Public Liability Insurance if you work with clients or in public spaces; Professional Indemnity Insurance if you provide services such as consultancy, advisory work or design; Employer’s Liability Insurance if you employ anyone, even casually; and Product Liability Insurance if you manufacture or sell goods.
“Insurance isn’t optional for many new businesses,” Sean explains. “As a self-employed individual, all your personal assets are on the line if something goes wrong. This includes your house, car, savings accounts, watches and jewellery etc. Failing to get the right cover can leave you exposed personally, and it is a critical step when moving into self-employment.”
Many new sole traders begin working from a spare room, small office space, or garage. However, you may need to notify your local council if your business changes how your home is used, involves customers visiting, requires you to store stock or equipment, may create noise or additional traffic, or involves structural alterations. This step is often overlooked but can be essential, particularly for home‑based trades and service businesses.
You must also inform your mortgage provider and home insurance company, as working from home changes your risk profile. This is something both lenders and insurers must be informed about. “We’ve seen new business owners caught out because they didn’t realise their home insurer needed to know,” Sean says. “It’s a simple phone call that prevents serious issues later.”
Another important change is the introduction of Making Tax Digital for Income Tax (MTD ITSA) from April 2026, which many self‑employed individuals will need to comply with. This requires keeping digital records, using HMRC‑recognised software, submitting quarterly updates, and completing a Final Declaration instead of a traditional annual tax return.
Anyone moving into self‑employment now should set up digital bookkeeping straight away, as it will soon be compulsory.
“MTD is a major shift, but it also gives business owners better control of their numbers throughout the year,” Sean says. “Planning for it early is a real advantage.” Burgis & Bullock is hosting free monthly briefings on MTD, both online and at our offices, and these sessions are ideal for anyone wanting to better understand the changes.
Unlike employment, where payroll processes everything for you, self‑employment requires full financial record‑keeping. This includes receipts, invoices issued and received, mileage logs, bank statements, expense claims, stock and asset records, and evidence of all income and allowable expenses. These records must be kept for five years after the 31 January deadline for the relevant tax year. Digital record‑keeping is recommended and will form part of the legal requirements under MTD.
Many individuals begin self‑employment while remaining in part‑time or full‑time employment. This means you will continue to pay PAYE on your employment income, while paying tax and National Insurance on your self‑employment profits via Self-Assessment, with both income streams reported together. Understanding how this affects your overall tax position is crucial. “When employment and self‑employment run side by side, tax can become more complex,” Sean notes. “Good advice early on helps avoid underpayments and shock tax bills.”
Switching from employment to self‑employment is empowering and full of opportunity, but it also comes with important legal responsibilities that should not be ignored.
“At Burgis & Bullock, we guide new business owners through the transition, so they avoid the pitfalls and start on solid ground,” concludes Sean. “If you’re planning to become self‑employed in 2026, talk to us early – it makes all the difference.”
For further information, please contact Sean Farnell or your local Burgis & Bullock office https://www.burgisbullock.com/contact-us/
Sean Farnell, Partner at Burgis & Bullock
making tax digital for income tax