Self Assessment tax returns for sole traders

How do I tell HMRC that I need to fill in a tax return?

If you start working for yourself as a sole trader, you’ll usually need to register for Self Assessment with HM Revenue & Customs (HMRC). If you need to register, you should normally do so by 5 October following the end of the tax year in which you started trading.

Once you’ve registered, you’ll need to meet your ongoing tax reporting obligations.

As a sole trader, you’re responsible for:

• keeping accurate records of your business income and allowable expenses
• submitting the tax information HMRC requires by the relevant deadlines
• paying any Income Tax and Class 4 National Insurance due
• registering for VAT if your taxable turnover exceeds the VAT registration threshold
• registering for the Construction Industry Scheme (CIS) if your business operates within the scheme.

Making Tax Digital for Income Tax

Making Tax Digital for Income Tax (MTD for IT) is being introduced in phases.

If you’re required to use MTD for IT, you’ll need to:

• keep digital records of your business income and expenses
• use HMRC-compatible software
• send quarterly updates to HMRC
• submit a final declaration after the end of the tax year.

MTD for IT became mandatory from:

• 6 April 2026 for sole traders and landlords with qualifying income of more than £50,000
• 6 April 2027 for those with qualifying income of more than £30,000
• 6 April 2028 for those with qualifying income of more than £20,000.

If you’re below the relevant threshold, you’ll continue to submit a Self Assessment tax return under the existing rules unless HMRC tells you otherwise.

What income and expenditure do I need to include?

Your Self Assessment tax return should include all of your taxable business income for the tax year, together with any other taxable income you receive that must be reported to HMRC.

For a sole trader, this typically includes:

• income from your business
• any other self-employed income
• employment income (if you also have a job)
• rental income
• interest, dividends or other investment income where these need to be declared.

When calculating your business profits, you can deduct allowable business expenses from your business income. It’s important to keep accurate records to support any expenses you claim.

Some types of income, such as ISA interest and Premium Bond prizes, are tax-free and do not normally need to be included on your tax return.

HMRC will use the information on your tax return (or, if you’re within Making Tax Digital for Income Tax, your final declaration) to calculate any Income Tax and National Insurance you owe.

What information do I need to keep?

You must keep accurate records to support the information you include in your Self Assessment tax return (or your final declaration if you use Making Tax Digital for Income Tax).

For your business, you should keep records of:

• sales and other business income
• purchase invoices
• receipts for allowable business expenses
• business bank statements
• payroll records if you employ staff
• VAT records, if you’re VAT registered
• details of business assets, such as vehicles, machinery and equipment
• loans and other business finance.

You should also keep records of any other taxable income you need to report, such as:

• employment income (for example, your P60 or P45)
• rental income
• bank or building society interest where it needs to be declared
• pension income
• dividend vouchers and other investment income records.

If you’re required to use Making Tax Digital for Income Tax, you’ll also need to keep your records digitally using compatible software.

You should keep your records for at least six years, as HMRC may ask to see evidence to support the figures you’ve reported.

When do I need to submit my tax information?

The deadlines you need to meet depend on whether you use Self Assessment or Making Tax Digital (MTD) for Income Tax.

If you complete a Self Assessment tax return, the deadline for submission is:

• 31 January following the end of the tax year if you file your return online.

Any Income Tax and National Insurance due is also normally payable by 31 January.

If you use Making Tax Digital for Income Tax, you’ll need to:

• submit quarterly updates to HMRC during the tax year

• submit your final declaration by 31 January following the end of the tax year.

Any Income Tax and National Insurance due is also normally payable by 31 January.

Your software will help you keep track of the relevant submission deadlines.

The final declaration replaces the annual Self Assessment tax return for taxpayers within Making Tax Digital for Income Tax.

What are payments on account?

Payments on account are advance payments towards your next Income Tax bill. They help spread the cost of your tax by requiring you to pay part of it before your next tax return or final declaration is submitted.

You may need to make payments on account if your Self Assessment tax bill is above HMRC’s threshold.

Payments on account are normally made in two equal instalments:

• 31 January following the end of the tax year
• 31 July after the first payment.

Each payment is usually 50% of your previous year’s Income Tax and Class 4 National Insurance liability. They do not include Capital Gains Tax or Student Loan repayments.

When your actual tax liability for the year is calculated, HMRC will compare it with the payments you’ve already made:

• if you’ve paid too little, you’ll need to pay the balance
• if you’ve paid too much, you’ll normally receive a refund or the overpayment can be set against future tax liabilities.

If you expect your profits to fall significantly, you may be able to apply to reduce your payments on account. However, if you reduce them too much and underpay your tax, HMRC may charge interest on the shortfall.

Do I need an accountant?

You don’t have to use an accountant to complete your tax return or comply with Making Tax Digital. Many sole traders use HMRC-compatible software to manage their records, help estimate their tax liability and submit information themselves.

However, you’re legally responsible for making sure the information submitted to HMRC is complete and accurate, even if an accountant prepares and submits it on your behalf. Missing filing or payment deadlines can result in penalties and interest. Therefore it is also a good idea to seek professional advise if you are unsure.