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

If you've recently turned your side project into a proper business as a sole trader in the UK, there's one thing on your to-do list that probably feels about as appealing as a root canal: the self-assessment tax return. It's the system HMRC uses to collect income tax from people whose tax isn't automatically deducted at source. Unlike employees who have their tax quietly handled through PAYE, you're now responsible for calculating and paying your own income tax and National Insurance contributions.

It can feel daunting the first time through—especially if numbers aren't your thing. But once you understand the steps, the process is actually straightforward. This guide walks you through everything you need to know, from registration to submission.

What is self-assessment?

Self-assessment is straightforward in theory: you tell HMRC how much you earned, what you spent getting that income, and they calculate how much tax you owe. In practice, it covers all your income for the tax year (6 April to 5 April), not just your self-employment profits. That includes:

• Self-employment income
• Employment income (if you have a day job too)
• Rental income (if you're a landlord—see our rental income guide for the full breakdown)
• Savings interest
• Dividend income
• Capital gains

The key thing: you're reporting your actual profit (income minus expenses), not your turnover. That's where proper record-keeping matters.

Do you need to register—and when?

If you're a sole trader, you must register for self-assessment with HMRC. Register 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, the deadline is 5 October 2027. Registering early, though? Always better. It gets you your Unique Taxpayer Reference (UTR) and access to the Government Gateway well before January deadlines sneak up on you.

The registration process

You'll need your National Insurance number and about 15 minutes. HMRC will post your UTR within two weeks, then you set up your Government Gateway account and you're ready to file.

Records, calendars, and the deadlines that matter

The UK tax year runs 6 April to 5 April. For 2025/26, the key dates are:

Deadline	Action
5 October 2026	Register for self-assessment (if new)
31 October 2026	Paper tax return deadline
31 January 2027	Online return deadline + payment due
31 July 2027	Second payment on account (if applicable)

Most sole traders file online—31 January is the real cutoff. Filing early doesn't mean you pay early; the payment deadline is always 31 January regardless of when you submit.

What records to keep

Throughout the year, you'll need:

Income:

• Sales invoices (even for cash sales)
• Bank statements showing payments in
• Records of any other income (interest, rentals, etc.)

Expenses:

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

General:

• Bank statements for all business accounts
• Records of equipment or assets you've bought
• Details of any personal use of business items (you can only claim the business portion)

HMRC requires you to keep these for at least five years after the January submission deadline. Using accounting software like Relentify—where you can connect your bank feed and categorise transactions as they happen—makes this dramatically easier than a shoebox of receipts and a December panic.

Completing your tax return

The forms you'll need

A self-assessment return has a core form (SA100) plus supplementary pages depending on what you've earned. As a sole trader, you'll typically complete:

• SA100 — Personal details, total income summary
• SA103S (short) or SA103F (full) — Self-employment pages

If your turnover is below £85,000, the short pages are fine. Above that, you'll need the full version with more detailed breakdowns.

The self-employment section, step by step

1. Business details — Name, trade description, start date
2. Turnover — Total income before expenses
3. Expenses — Breakdown by category (cost of goods sold, travel, office, staff, etc.)
4. Profit — Turnover minus allowable expenses
5. Capital allowances — Equipment or assets you bought for the business (our fixed assets guide covers depreciation in detail)
6. Losses — If you made a loss, record it to carry forward or offset

Allowable expenses

You can deduct any legitimate business expense from your income. Common ones include:

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

The rule: it must be wholly and exclusively for business purposes. If your phone is partly personal, claim only the business percentage.

Simplified expenses (HMRC's shortcut)

You don't have to track every receipt. HMRC offers flat-rate deductions:

• Working from home: £10/month (25–50 hours), £18/month (51–100 hours), £26/month (101+ hours)
• Vehicles: 45p per mile for the first 10,000 miles per year, 25p after that
• Living at your business premises: Flat rate based on number of occupants

Use whichever gives you the bigger deduction—but be consistent within each category for the tax year.

Tax and National Insurance: what you'll owe

Once you've calculated your profit, your tax bill breaks down like this.

Income tax

Your profit is added to any other income you have. Tax is then calculated on the total at these rates (2025/26):

• Personal Allowance: First £12,570 is tax-free
• Basic rate (20%): £12,571 to £50,270
• Higher rate (40%): £50,271 to £125,140
• Additional rate (45%): Above £125,140

Check the latest HMRC guidance—these thresholds change in the Budget.

National Insurance

You pay two types:

• Class 2: Flat weekly rate (currently £3.45) if profits exceed the Small Profits Threshold
• Class 4: A percentage of profits between the Lower and Upper Profits Limits

Payments on account

If your bill exceeds £1,000, HMRC usually asks for advance payments on 31 January (50%) and 31 July (50%) of the following year. If your income drops, you can apply to reduce them—but get it wrong and you'll owe interest.

Common mistakes (and how to avoid them)

Missing the deadline. Late filing triggers a £100 automatic penalty, even if you owe nothing. Set a reminder in December.

Forgetting deductions. Sole traders in their first year often miss legitimate expenses. Keep records throughout the year, not January.

Mixing personal and business money. It's not legally required for sole traders, but opening a separate business bank account (even at the same bank) makes tracking income and expenses exponentially easier. For guidance on setting one up, see our complete business banking guide.

Forgetting payments on account. Your first bill can shock you if you weren't expecting to pay 150% of your normal tax bill in January (this year's balance plus next year's first instalment).

Not keeping records. HMRC can enquire into your return for 12 months after filing. No receipts? You could face penalties.

Filing your return and getting help

You can file through:

• The HMRC Government Gateway — Direct to HMRC
• Accounting software — Many platforms file automatically
• An accountant — They handle it for you

If you're invoicing and managing multiple clients, accounting software is often the most efficient—your figures are already in the system and ready to submit without re-entering everything into the HMRC portal.

For your first return, consider reaching out to an accountant for a one-off consultation. Even a few hundred pounds to get it right beats an HMRC enquiry later. HMRC also runs free webinars on self-assessment basics.

Frequently Asked Questions

What if I miss the 31 January deadline? You'll face an automatic £100 penalty, plus additional penalties if you stay late. Interest also accrues on unpaid tax. If you're going to miss it, file anyway—don't ignore the deadline entirely.

Can I claim expenses from before I registered? Only from when you actually started trading. If you started in July but didn't register until October, you claim expenses from July onwards, not from October.

What if I made a loss in my first year? Record it on your return. You can carry it forward to offset profits in future years, or offset it against other income in the same year (if you have employment income, for example).

Do I need an accountant? Not legally required, but helpful for your first few years. Many sole traders eventually do their own returns once they've been through the process once. Good accounting software (with step-by-step guidance) can remove most of the guesswork.

When do I pay the tax I owe? 31 January of the year following the tax year end. So for the 2025/26 tax year, you pay by 31 January 2027. Filing early doesn't change the payment deadline.

What if HMRC asks to see my records? Provide them. If you can't, you could face penalties—potentially up to 100% of the tax owed in cases of deliberate evasion. Keep everything for five years.

Can I claim meals and entertainment? Meals are generally not deductible unless you're travelling for business (then they're travel expenses). Entertainment for clients is not deductible. Stick to essentials.

What's the difference between SA103S and SA103F? The short form (SA103S) is for turnover below £85,000. The full form requires more detail—cost of goods sold, depreciation, etc. Above £85,000, you must use the full form.

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The most important thing: start early, keep good records as you go, and don't leave everything until the last week of January. Self-assessment becomes routine once you've done it once. Having the right tools in place—a separate business account, accounting software, maybe a folder system for receipts—makes each subsequent year easier than the last. The first one just takes a bit of patience.