A Beginner's Guide to Self-Assessment Tax Returns for Sole Traders

If you have recently started working for yourself as a sole trader in the UK, one of the first things you need to get to grips with is the self-assessment tax return. Unlike employees who have tax deducted automatically through PAYE, sole traders are responsible for calculating and paying their own income tax and National Insurance contributions.

It can feel daunting the first time, but the process is straightforward once you understand the steps. This guide walks you through everything you need to know, from registration to submission.

What is self-assessment?

Self-assessment is the system HMRC uses to collect income tax from people whose tax is not automatically deducted at source. As a sole trader, you report your income and expenses for the tax year (6 April to 5 April) and calculate the tax you owe.

You are not just reporting your self-employment income. Your self-assessment return covers all your income for the year, including:

Self-employment profits
Employment income (if you also have a job)
Rental income
Savings interest
Dividend income
Capital gains

Do you need to register?

If you are a sole trader, you must register for self-assessment with HMRC. You should do this as soon as you start trading, and no later than 5 October following the end of the tax year in which you started.

For example, if you started self-employment in July 2026, you would need to register by 5 October 2027 at the latest. However, registering early is always better — it gives you your Unique Taxpayer Reference (UTR) and access to the online filing system well before the deadline.

How to register

Go to the HMRC website and register for self-assessment
You will need your National Insurance number
HMRC will send you a UTR number by post (this can take up to two weeks)
Once you have your UTR, you can set up your online Government Gateway account

Understanding the tax year and deadlines

The UK tax year runs from 6 April to 5 April. For the 2025/26 tax year (6 April 2025 to 5 April 2026), the key deadlines are:

| Deadline | What | |----------|------| | 5 October 2026 | Register for self-assessment (if new) | | 31 October 2026 | Paper tax return deadline | | 31 January 2027 | Online tax return deadline | | 31 January 2027 | Pay the tax you owe | | 31 July 2027 | Second payment on account (if applicable) |

Most sole traders file online, which gives you until 31 January. Filing early does not mean you have to pay early — the payment deadline remains 31 January regardless of when you submit.

What records you need to keep

Throughout the year, you need to keep records of:

Income

All sales invoices
Bank statements showing income received
Records of cash payments received
Any other income (interest, dividends, rental)

Expenses

Receipts for business purchases
Mileage logs if you claim vehicle expenses
Utility bills if you work from home
Phone and internet bills (business portion)
Insurance, subscriptions, and professional fees

General

Bank statements for all business accounts
Records of any assets bought or sold
Details of any personal use of business items

HMRC requires you to keep these records for at least five years after the 31 January submission deadline for the relevant tax year.

Using accounting software makes this considerably easier. Rather than keeping paper records and compiling everything at year end, you can record transactions as they happen and generate the figures you need at filing time. Tools like Relentify are designed to make this process straightforward, with bank feeds that automatically import transactions and categorise them.

How to complete your tax return

The main sections

A self-assessment tax return consists of a core form plus supplementary pages depending on your circumstances. As a sole trader, you will typically need:

SA100 — The main tax return (personal details, total income summary)
SA103S (short) or SA103F (full) — Self-employment supplementary pages

The short self-employment pages are for businesses with turnover below £85,000. If your turnover exceeds this, you will need the full pages, which require more detailed breakdowns.

Step-by-step: the self-employment section

Enter your business details — Business name, description of trade, and start date
Report your turnover — Total income from your self-employment before expenses
Claim your expenses — Broken down by category (cost of goods, travel, office costs, etc.)
Calculate your profit — Turnover minus allowable expenses
Capital allowances — Claim for any equipment or assets you bought for the business
Losses — If you made a loss, record it here to carry forward or offset

Allowable expenses

As a sole trader, you can deduct legitimate business expenses from your income before calculating tax. Common allowable expenses include:

Office supplies and stationery
Phone, internet, and postage
Travel and mileage
Professional subscriptions and memberships
Accountancy fees
Insurance
Marketing and advertising
A proportion of household costs if you work from home
Training directly related to your business

You cannot claim for anything that is not wholly and exclusively for business purposes. If something has both personal and business use (like your phone), you can only claim the business proportion.

Simplified expenses

HMRC offers simplified expenses for certain costs, which can be easier than tracking actual figures:

Working from home — Flat rate based on hours worked (25-50 hours: £10/month, 51-100: £18/month, 101+: £26/month)
Vehicles — Mileage rate (45p per mile for first 10,000 miles, 25p thereafter)
Living at your business premises — Flat rate deduction based on occupants

You do not have to use simplified expenses — you can claim actual costs instead if that gives you a higher deduction. But you must be consistent within each category for the tax year.

Calculating your tax bill

Once you have determined your profit, your tax bill is calculated as follows:

Income tax

Your self-employment profit is added to any other income you have for the year. Tax is then calculated on the total:

Personal Allowance — The first £12,570 is tax-free (at current rates)
Basic rate (20%) — On income from £12,571 to £50,270
Higher rate (40%) — On income from £50,271 to £125,140
Additional rate (45%) — On income above £125,140

Note: These thresholds are correct as of writing but check the latest HMRC guidance, as they can change in the Budget.

National Insurance

As a sole trader, you pay two types of National Insurance:

Class 2 — A flat weekly rate (currently £3.45 per week) if your profits are above the Small Profits Threshold
Class 4 — A percentage of your profits between the Lower Profits Limit and Upper Profits Limit

Payments on account

If your tax bill is above £1,000, HMRC will usually ask you to make payments on account. These are advance payments towards next year's tax bill, based on the assumption that your income will be similar.

Payments on account are due:

31 January (50% of the previous year's bill)
31 July (another 50%)

If your income drops significantly, you can apply to reduce your payments on account. But be careful — if you reduce them too much and then owe more, HMRC may charge interest.

Common mistakes to avoid

Missing the deadline

Late filing incurs an automatic £100 penalty, even if you owe no tax. Further penalties accumulate the longer you delay. Set a reminder well before 31 January.

Not claiming all your expenses

Many sole traders, especially in their first year, forget to claim legitimate expenses. Keep records throughout the year so you do not miss deductions at filing time.

Mixing personal and business finances

Open a separate bank account for your business. It is not a legal requirement for sole traders, but it makes tracking income and expenses dramatically easier and reduces the risk of errors.

Forgetting about payments on account

Your first self-assessment bill can be a shock if you forget about payments on account. You may owe up to 150% of your normal tax bill in January — the balancing payment for the current year plus the first payment on account for the next year.

Not keeping records

HMRC can open an enquiry into your tax return for up to 12 months after the filing deadline. If you cannot produce records to support your figures, you could face penalties.

Filing your return

You can file your self-assessment return:

Online through HMRC — Using the Government Gateway
Through accounting software — Many accounting packages can file directly to HMRC
Through an accountant — They can file on your behalf

Filing through accounting software is often the most efficient approach, as your figures are already in the system and can be submitted without re-keying them into the HMRC portal.

Getting help

If this is your first return and you feel overwhelmed, consider:

HMRC helpline — They can answer specific questions about your return
An accountant — Even a one-off consultation can be worthwhile for your first year
HMRC webinars — Free online sessions covering self-assessment basics
Accounting software — Good software guides you through the process step by step

The most important thing is to start early, keep good records, and do not leave everything until the last week of January. Self-assessment becomes routine once you have been through it once, and having the right tools in place makes each subsequent year easier than the last.