Self-Assessment Tax Return: A Guide for UK Sole Traders
Self-assessment is how sole traders report their income and expenses to HMRC. The process is more straightforward than its reputation suggests — but the deadlines are unforgiving. Here’s everything you need to know for the 2025/26 return due in January 2027.
Who needs to file a self-assessment return?
You must file if, in the relevant tax year, you were:
- Self-employed as a sole trader with gross income above £1,000 (the trading allowance)
- A partner in a business partnership
- A company director receiving income not taxed through PAYE
- A landlord with rental income above £1,000
- Someone with untaxed income above £2,500 — freelance work, tips, commission
- Someone with dividends above £500 or capital gains above £3,000
- Liable for the High Income Child Benefit Charge — household income above £60,000
- Someone who received a notice to file from HMRC — this makes filing mandatory regardless of income
Key dates for 2025/26 (the return due in January 2027)
The 2025/26 tax year ran from 6 April 2025 to 5 April 2026. These are the deadlines for reporting that income:
| Deadline | Date | What it covers |
|---|---|---|
| Register for Self Assessment | 5 October 2026 | If you became self-employed in 2025/26 and haven’t yet registered. Miss this and HMRC can charge a penalty before you’ve even filed. |
| Paper return deadline | 31 October 2026 | If filing on paper rather than online. Most people file online. |
| Online return deadline | 31 January 2027 | The main deadline for the vast majority of sole traders. |
| Tax payment (balancing payment + 1st payment on account) | 31 January 2027 | Any tax owed for 2025/26, plus the first payment on account for 2026/27. |
| Second payment on account | 31 July 2027 | The second instalment toward your estimated 2026/27 tax bill. |
Registering for Self Assessment
If you started self-employment during the 2025/26 tax year and haven’t yet registered, register at gov.uk/register-for-self-assessment by 5 October 2026.
HMRC will issue your Unique Taxpayer Reference (UTR) — a ten-digit number needed to file your return. This can take up to ten working days to arrive, so don’t leave registration until October. If you’ve been registered for previous tax years, your UTR remains the same.
What the return covers
All income from self-employment for the tax year, before any expenses. This is your gross turnover — not your profit. Also include any other income: employment, savings interest, dividends, rental income, capital gains.
Costs of running your business deducted from income to arrive at taxable profit. Includes office costs, business travel, staff costs, marketing, professional fees, software, and a proportion of home costs if you work from home. See our sole trader expenses guide for the full list.
The Personal Allowance (£12,570), pension contributions, Gift Aid donations, and losses from earlier years that can be carried forward all reduce the amount of tax owed.
How tax is calculated
Income Tax (2025/26)
| Band | Profits | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Above £125,140 | 45% |
Class 4 National Insurance (2025/26)
| Profits | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 – £50,270 | 6% |
| Above £50,270 | 2% |
Payments on account
Payments on account are advance payments toward next year’s tax bill — required when your total tax and NIC bill exceeds £1,000 and less than 80% of your tax is collected at source. Each payment is 50% of your previous year’s bill.
If you expect your income to be lower in the coming year, you can apply to reduce your payments on account using form SA303 through your HMRC online account. Be cautious: if you over-reduce and your actual bill is higher, HMRC charges interest at 7.75% per annum on the shortfall from the original payment date.
The penalty structure
HMRC’s penalties for late filing and payment escalate quickly — and the filing penalty applies even if you owe no tax.
| How late | Filing penalty |
|---|---|
| 1 day late | £100 automatic penalty — even if no tax is owed |
| 3 months late | £10 per day, up to a maximum of £900 |
| 6 months late | Additional 5% of tax owed (or £300, whichever is higher) |
| 12 months late | A further 5% of tax owed (or £300, whichever is higher) |
Late payment penalties are separate — 7.75% interest per annum from the payment date, plus 5% surcharges at 30 days, 6 months, and 12 months. File early and pay on time.
Making Tax Digital and self-assessment
From 6 April 2026, self-assessment changed significantly for sole traders and landlords with qualifying income above £50,000. Under Making Tax Digital for Income Tax, they must keep digital records, submit quarterly updates to HMRC, and file a final declaration (replacing the annual return) by 31 January.
| Qualifying income | MTD applies from | Estimated affected |
|---|---|---|
| Above £50,000 | 6 April 2026 | ~864,000 sole traders and landlords |
| Above £30,000 | 6 April 2027 | A further ~970,000 |
| Above £20,000 | 6 April 2028 | Further expansion |
If your income is below £50,000, the process is unchanged for 2025/26 — one annual return as before. See our Making Tax Digital guide for the full detail on quarterly deadlines and compatible software.
How to file
File at gov.uk/self-assessment-tax-returns. You’ll need your UTR, National Insurance number, and Government Gateway login, plus records of all income and expenses for the tax year.
Most sole traders with straightforward finances complete the return in one to two hours. An accountant becomes worthwhile when you have multiple income sources, you’re unsure about allowable expenses, your income is near the higher rate threshold, or you’re newly affected by Making Tax Digital. A self-assessment return from an accountant typically costs £150–400 for a straightforward sole trader. See our guide on how to choose an accountant.
Common mistakes to avoid
If you started trading in 2025/26, register by 5 October 2026. Miss this and HMRC can charge a penalty before you’ve filed anything.
HMRC receives data from banks, employers, and platforms including Etsy, eBay, and Airbnb. Undeclared income is increasingly likely to be detected through data matching.
Personal costs passed through the business, home costs calculated incorrectly, and non-business travel are common errors. See our sole trader expenses guide for what is and isn’t allowable.
In your first year, the January payment is 150% of your annual bill. Budget for this from the start of trading — don’t spend money that HMRC will need in January.
HMRC can investigate returns for up to four years — or longer in cases of suspected fraud. Keep all business records for at least five years after the relevant tax year ends on 5 April.
Useful resources
- HMRC Self Assessment — file your return at gov.uk/self-assessment-tax-returns
- Register for Self Assessment — gov.uk/register-for-self-assessment
- Check if you need to file — gov.uk/check-if-you-need-a-tax-return
- HMRC Self Assessment helpline — 0300 200 3310, Monday to Friday 8am–6pm
- Our Making Tax Digital guide — everything you need to know about MTD for Income Tax
More guides for UK small business owners
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