A Plain-English Guide to Self Assessment for Sole Traders
“Would 100% recommend, is always polite, professional and helpful! He is always available to answer any questions I have and his knowledge has been a saving grace many times!”
If you are self-employed and earning money outside of PAYE, HMRC expects you to report your income every year through a self assessment tax return. This guide explains exactly what that means, when it applies to you, and what to do next.
Why self assessment matters for sole traders
When you are employed, your tax is taken from your wages automatically through PAYE. When you are self-employed, that system does not exist for your trading income. You are responsible for calculating and reporting what you earned and what tax you owe.
HMRC does not always send a reminder. If you have been self-employed and have not registered, the obligation to tell HMRC still applies from the moment your trading income exceeds the £1,000 trading allowance. Missing that registration deadline can result in a penalty, even if you did not owe any tax.
From April 2026, sole traders with trading income over £50,000 in the 2024-25 tax year must move to Making Tax Digital for Income Tax. That means quarterly digital updates to HMRC plus an annual declaration. HMRC estimates 864,000 sole traders and landlords are affected. If this applies to you, the first set of quarterly deadlines runs from 7 August 2026 onwards.
Where most sole traders go wrong
Most problems with self assessment are not caused by fraud or deliberate errors. They come from not knowing what you did not know. The three areas below account for the majority of issues I see when working with sole traders who come to me after a difficult year.
Not registering until it is too late
You must register for self assessment by 5 October following the end of the first tax year in which you were self-employed. If you started trading in the 2024-25 tax year, the deadline to register was 5 October 2025. Late registration does not cancel your liability, it just adds a penalty on top of it.
Claiming expenses without knowing what qualifies
Sole traders can deduct allowable business expenses from their trading income before tax is calculated. Common examples include tools, professional subscriptions, mileage, and a portion of home working costs. Claiming personal items or non-allowable costs is one of the most common errors HMRC flags, so it is worth being precise.
“Most sole traders I speak to are not in trouble. They are just behind and anxious about what they do not know. In most cases, a clear conversation and a bit of organisation is all it takes to get things sorted.”
What to do, step by step
The process has four stages. None of them are technically complicated once you know what is required. The biggest obstacle for most sole traders is simply not knowing where to start.
- Register for self assessment with HMRC at gov.uk. You will need your National Insurance number and personal details. HMRC will send your Unique Taxpayer Reference (UTR) by post within about 10 working days. Allow time for this if you are approaching a deadline.
- Gather your records for the tax year. That means your total business income, a clear breakdown of allowable expenses, and any other income sources (employment, interest, dividends, rental). HMRC guidance confirms that self-employment income is reported on the SA103S supplementary page.
- File your return online by 31 January following the end of the tax year. For 2025-26, that deadline is 31 January 2027. 97% of self assessment returns are filed online, which also gives you three extra months compared to paper filing.
Once filed, HMRC will calculate your Income Tax and Class 4 National Insurance based on your profits. If payment on account applies, you may also need to make advance payments towards the following year’s bill in January and July.
Costs and what to expect
Filing self assessment yourself is free in terms of software, since HMRC provides a free online portal. The real cost of DIY is the time spent learning what applies to your situation and the risk of filing incorrectly. Accountant fees for a sole trader self assessment typically range depending on the complexity of your income and expenses. At Anchor Accounts and Books, I charge a fixed fee agreed upfront so there are no surprises at the end.
| Option | Pros | Cons |
|---|---|---|
| DIY via HMRC portal | No accountant fee, free to use | Risk of errors, missed expenses, time-consuming |
| Using an accountant | Accurate filing, expenses reviewed, deadlines tracked | Fixed fee applies |
How to get started today
If you are not sure whether you need to file, the simplest first step is to check your income against the thresholds and confirm your registration status with HMRC. If you are already registered, your UTR number will be on any previous correspondence from HMRC. Either way, acting sooner means more options available to you.
- Check whether you need to file: if your self-employment income exceeded £1,000 in the 2025-26 tax year, registration and filing is required.
- Gather 12 months of income and expense records for the relevant tax year. A simple spreadsheet or cloud accounting software such as QuickBooks or FreeAgent is sufficient to get organised.
Ready to sort your self assessment return?
I will review your income and expenses, prepare your self assessment return and file it with HMRC for a fixed fee agreed before we start. No tie-in, no handoffs and a direct line to me throughout.
Are you on top of your self assessment obligations?
Answer five quick questions and get a clear next step tailored to your situation as a sole trader.
AAT qualified accountant based in Uttoxeter. Personal, one-to-one accounting for small businesses and sole traders across the UK.