Sole trader self assessment: how to register and file (2025/26)

Published Monday 29 June 2026

Table of contents

• What is self assessment?
• When do sole traders need to file self assessment?
• Self assessment deadlines and penalties
• How to register for self assessment as a sole trader
• Allowable expenses for sole traders
• What documents do you need for your self assessment?
• Step-by-step guide to filing your sole trader self assessment
• Online vs paper filing
• Payment on account: what sole traders need to know
• Why you should file your self assessment early
• Do you need an accountant for self assessment?
• Making Tax Digital implications for sole traders
• Get your sole trader finances organised with Xero

Key takeaways

• Register for self assessment by 5 October 2026 if you started trading in the 2025/26 tax year, and file your return by 31 January 2027 to avoid penalties starting at £100 for late filing.
• Gather all essential documents before starting your return, including your UTR number, business invoices, allowable expense records, and personal tax information such as your National Insurance number and any employment records.
• Keep digital records using HMRC-recognised software if your gross income exceeds £50,000, as Making Tax Digital now requires quarterly updates to HMRC. The threshold lowers to £30,000 from April 2027.
• Use an accountant or accounting software to ensure accuracy and save time, particularly if your finances are complex.

What is self assessment?

Self assessment is the system HMRC uses to collect Income Tax from people whose tax is not fully deducted at source. If you're a sole trader, you use self assessment to report your income and expenses each tax year so HMRC can work out what you owe.

Unlike employees who have tax taken through PAYE, sole traders are responsible for calculating and paying their own tax. You report your earnings for the tax year (6 April to 5 April) and pay any tax due by the following 31 January.

Self assessment also applies if you have other untaxed income, such as rental income, investment returns, or earnings over £100,000. Even if you're employed, you may still need to file a return alongside your sole trader income.

When do sole traders need to file self assessment?

You must file a self assessment tax return if you're a sole trader and your self-employment income exceeds £1,000 in the tax year. This threshold is known as the trading allowance.

The £1,000 trading allowance means you don't need to register for self assessment or pay tax on the first £1,000 of self-employment income. If your total self-employment income is £1,000 or less, you can use this allowance instead of calculating expenses. You cannot use the trading allowance and claim expenses at the same time.

Beyond the trading allowance, you must register and file if you:

• earn more than £1,000 in gross self-employment income during the tax year
• need to pay Class 4 National Insurance on your profits
• have other untaxed income, such as rental or investment income
• want to make voluntary Class 2 National Insurance contributions to protect your state pension

You can check whether you need to file on the GOV.UK self assessment page.

Self assessment deadlines and penalties

Self assessment deadlines are fixed dates set by HMRC for registering, filing, and paying your tax. Missing them triggers automatic penalties, so it's worth noting these dates early.

Key deadlines for the 2025/26 tax year:

• register for self assessment by 5 October 2026 (if you're new)
• submit your paper return by 31 October 2026
• file your online return and pay your tax by 31 January 2027

According to HMRC, 5.65 million taxpayers still needed to file their self assessment return as of January 2026. Filing early gives you more time to check your figures and avoids last-minute stress.

If you miss the 31 January online deadline, HMRC applies penalties on an escalating scale:

• pay £100 immediately after the deadline, even if you owe no tax
• pay £10 per day after three months late, up to 90 days (maximum £900)
• face a charge of 5% of the tax due, or £300 (whichever is greater), at six months late
• face a further 5% of the tax due, or £300 (whichever is greater), at 12 months late

HMRC also charges interest on late payments from 1 February. The sooner you pay, the less interest builds up. You can check the latest penalty rates on GOV.UK.

How to register for self assessment as a sole trader

Registering for self assessment is the first step to legally operating your business and filing your tax return. You register online through your Government Gateway account.

Here's what to expect during the registration process:

• complete registration online in 10 to 15 minutes
• receive your Unique Taxpayer Reference (UTR) number by post in up to 10 working days
• allow two to three weeks to finish the full process before deadlines

After you register, HMRC will send you a 10-digit UTR number. You need this to complete your self assessment tax return. Once you have your UTR and Government Gateway login, you can file your return online through the HMRC self assessment service.

Allowable expenses for sole traders

Allowable expenses are business costs you can deduct from your income before calculating tax. The more legitimate expenses you claim, the lower your taxable profit and your tax bill.

Common categories of allowable expenses include:

• claim office costs such as stationery, phone bills, and software subscriptions
• claim travel expenses including fuel, parking, public transport, and business mileage
• claim clothing and uniforms required specifically for work
• claim stock and raw materials used in your business
• claim marketing and advertising costs, including website expenses
• claim professional fees such as accountant or solicitor charges
• claim business insurance premiums

If you work from home, you can claim a portion of household costs like heating, electricity, and internet. HMRC offers a simplified expenses option where you claim a flat rate based on hours worked from home, rather than calculating actual costs.

Simplified expenses also apply to business vehicles and living on your business premises. For a full list of what you can and cannot claim, check the GOV.UK expenses guidance for the self-employed.

What documents do you need for your self assessment?

You'll need several documents and records to complete your self assessment accurately. Gathering these before you start saves time and reduces the chance of errors.

The main form you'll complete is the SA100 (the self assessment tax return). As a sole trader, you'll also need the SA103S (short self-employment supplement) if your turnover is below £85,000, or the SA103F (full self-employment supplement) if it's above. Other supplementary forms include the SA102 for employment income and the SA105 for UK property income.

Business records to gather

Start by collecting the core records from your sole trader work.

• find your 10-digit UTR number in HMRC correspondence
• collect all invoices and income records from your sole trader work
• keep receipts and records of allowable business expenses
• include mileage logs if you claim vehicle expenses

Personal tax information

You'll also need personal tax details alongside your business records.

• provide your National Insurance number
• include employment records such as P60, P45, or P11D if you had employed work
• add details of savings, investments, or pension income

You may also need details of student loan repayments, private pension payments, Gift Aid donations, and any foreign income or capital gains.

Bank statements are useful if you haven't tracked your finances elsewhere during the year. They can help you calculate income and expenses or fill gaps in your bookkeeping. Even if you don't submit them, keep all bank statements for at least five years after the tax year as HMRC may request them.

Step-by-step guide to filing your sole trader self assessment

Most sole traders file their self assessment online through HMRC's service. Filing online gives you until 31 January (rather than 31 October for paper returns) and provides automatic tax calculations.

Follow these six steps to complete your return:

1. Gather your UTR number, income records, expense receipts, and any P60 or P45 forms before you begin.
2. Sign in to HMRC online using your Government Gateway user ID and password to access the self assessment service.
3. Complete the SA100 form. The online form guides you through each section. Enter your self-employed income on the SA103S or SA103F supplement.
4. Claim your allowable business expenses. This reduces your taxable profit and the amount of tax you owe.
5. Review your tax calculation. HMRC automatically calculates the tax due based on your figures. Check everything carefully before proceeding.
6. Submit your return once you're satisfied everything is correct. Save or print a copy for your records.

After submitting, HMRC will confirm how much tax you owe. You can pay by bank transfer, direct debit, or through your online tax account.

Online vs paper filing

You can file your self assessment return either online or on paper, but online filing offers clear advantages for most sole traders.

Online filing benefits:

• file by 31 January rather than the earlier 31 October paper deadline
• benefit from automatic tax calculations that reduce errors
• receive instant confirmation that HMRC received your return
• get faster processing and quicker refunds if you're owed money

Paper filing drawbacks:

• meet the earlier 31 October deadline, giving you three fewer months
• calculate your tax manually, increasing the risk of mistakes
• allow for slower processing times and postal delays
• accept no instant confirmation of receipt

For most sole traders, online filing is the better option. It's quicker, gives you more time, and reduces the chance of errors. Paper returns are still available if you prefer them, but the earlier deadline means you need to plan further ahead.

Payment on account: what sole traders need to know

Payments on account are advance payments towards your next year's tax bill. HMRC requires them if your previous self assessment bill was £1,000 or more, and less than 80% of your tax was collected at source.

Each payment on account is 50% of your previous year's tax bill. You make two payments:

• make your first payment by 31 January, at the same time as your current year's tax
• make your second payment by 31 July

If your first self assessment return shows you owe £3,000, you'll pay that £3,000 plus a £1,500 payment on account for the following year. That's £4,500 in your first January payment. This first-year impact catches many new sole traders off guard, so it's worth budgeting for it.

If your income drops and you expect a lower tax bill, you can ask HMRC to reduce your payments on account through your online tax account. A balancing payment (or refund) is then made by the following 31 January once your actual tax bill is confirmed.

Why you should file your self assessment early

You can file your self assessment return as soon as the tax year ends on 5 April, even though the deadline isn't until the following January. Filing early has several practical advantages.

Benefits of filing early:

• know exactly how much tax you owe, giving you months to budget and save
• receive any refund sooner if HMRC owes you money
• avoid last-minute stress and the risk of technical issues near the deadline
• have time to correct mistakes or gather missing information
• plan your cash flow more effectively, especially if payments on account apply

Filing early doesn't mean you pay early. Your payment deadline stays at 31 January regardless of when you submit your return. You simply gain the advantage of knowing your tax position sooner.

Do you need an accountant for self assessment?

Using an accountant for self assessment is optional. You can legally file your own tax return, and many sole traders with straightforward finances do so successfully.

However, professional help can be valuable in certain situations. As your income and tax affairs grow more complex, professional support becomes more common; the majority of higher-income filers use an accountant or tax adviser to handle their return.

An accountant can help you:

• navigate complex tax rules and claim all eligible expenses
• save time so you can focus on running your business
• get advice on cash flow management and tax planning
• ensure your return is accurate and meets HMRC requirements

If your finances are relatively simple, accounting software can handle much of the work an accountant would do. It automates bookkeeping, tracks expenses, and generates the reports you need for your return.

Making Tax Digital implications for sole traders

Making Tax Digital (MTD) for Income Tax went live in April 2026. It requires sole traders above certain income thresholds to keep digital records and submit quarterly updates to HMRC using MTD-compatible software.

According to HMRC data, 864,000 sole traders and landlords with qualifying income over £50,000 must now use Making Tax Digital. The thresholds will reduce over the coming years:

• comply from April 2026 if your income is above £50,000
• comply from April 2027 if your income is above £30,000
• comply from April 2028 if your income is above £20,000

Under MTD, you must:

• keep digital records using HMRC-recognised software
• submit income and expense summaries every quarter
• file a final declaration at the end of the tax year

Since April 2024, only Class 4 National Insurance contributions are required for self-employed people. Voluntary Class 2 contributions are still available if you want to protect your state pension entitlement. You can check current rates on the GOV.UK National Insurance page.

If your income is currently below the threshold, it's still worth adopting digital record-keeping now. You can find out more about whether MTD applies to you on the GOV.UK Making Tax Digital page.

Get your sole trader finances organised with Xero

Staying on top of your records throughout the year makes self assessment far less stressful. Xero accounting software helps you track income and expenses in real time, so you're always ready when tax time arrives.

With automated bank reconciliation, receipt capture through Hubdoc, and clear reporting, you can spend less time on admin and more time growing your business. Run your business, not your books, and get one month free.

FAQs on sole trader self assessment

Here are answers to frequently asked questions about sole trader self assessment.

How are sole traders assessed for tax?

As a sole trader, you pay income tax on your business profits and Class 4 National Insurance contributions. You work out your profits by deducting your allowable business expenses from your self-employment income.

How much can I earn as a sole trader before paying tax?

The personal allowance for the 2025/26 tax year is £12,570, frozen until at least 2028. You also have the £1,000 trading allowance, which means you don't need to declare or pay tax on the first £1,000 of self-employment income.

What happens if I miss the self assessment deadline?

HMRC can charge penalties starting at £100, but you may be able to appeal if you have a reasonable excuse such as illness, bereavement, or an HMRC system failure. You can submit an appeal through your online tax account or by writing to HMRC.

What records do I need to keep for Making Tax Digital?

You must keep digital records of all business income and expenses using HMRC-recognised software. This includes sales invoices, purchase receipts, bank transactions, and mileage logs.

Who does Making Tax Digital apply to?

MTD for Income Tax currently applies to sole traders and landlords with qualifying income above £50,000, with thresholds reducing in future years. If your income falls below the threshold after you've joined, you can ask HMRC to leave the scheme.

What expenses can I claim as a sole trader?

You can claim any business expense that is wholly and exclusively for your trade, including office supplies, travel costs, professional fees, insurance, stock, and a portion of household costs if you work from home. Check the full list of allowable expenses on GOV.UK.