How Self Assessment Actually Works If You’re Working for Yourself
“Dealing with self assessments and tax returns can be very stressful. But David Roseweir in STZ Accounting made that very simple. He is approachable, efficient and very professional.”
How self assessment works for sole traders is one of the most-searched questions I come across from people who’ve recently gone self-employed. If that’s you, you’re in exactly the right place – and no, you haven’t done anything wrong by not knowing this already.
What Is Self Assessment and Do You Actually Need to Do It?
Self assessment is the system HMRC uses to collect tax from people whose income isn’t taxed automatically through an employer. If you’re a sole trader – meaning you run your own business and keep the profits yourself – you’re responsible for telling HMRC what you earned each year and paying whatever tax is owed. Nobody does it for you automatically, and HMRC won’t send you a bill out of nowhere.
You need to register for self assessment if your self-employment income was more than £1,000 in a tax year. The tax year runs from 6th April to 5th April the following year. If you’ve crossed that threshold and haven’t registered yet, that’s fixable – acting now is always better than waiting.
If you became self-employed between 6th April and 5th October, you need to notify HMRC by 5th October of that same year. Miss that date and there can be a penalty, but it’s not the end of the world – it just needs to be sorted.
The Deadlines You Need to Know (and What Happens If You Miss One)
There are two deadlines that matter most. The 31st October deadline applies if you file a paper tax return. The 31st January deadline is for online returns – and that’s also the date your tax bill is due for payment. Most sole traders file online, so 31st January is the one to keep in your head.
Miss the 31st January deadline and HMRC will charge you an automatic £100 penalty, even if you owe no tax at all. That penalty grows the longer you leave it. Per HMRC’s official self assessment guidance, the 5th October registration deadline also applies if you started self-employment in the previous tax year and haven’t yet told them about it.
What You Can Claim as a Sole Trader (and Why This Matters)
One of the biggest things I see sole traders miss is not claiming everything they’re entitled to. You can deduct allowable business expenses from your income before calculating your tax bill, which directly reduces what you owe. This covers travel costs, equipment, phone bills, professional subscriptions, and a proportion of home working costs if you work from home.
To put some numbers on it: if you earned £35,000 and had £8,000 of allowable expenses, you’d only pay tax on £27,000. At the basic rate, that saves you roughly £1,600 in tax. Keep records of everything you spend on the business throughout the year – even if you’re unsure whether it qualifies, I can check that when I’m preparing your return.
Making Tax Digital: The Change Coming for Sole Traders in 2026
There’s a significant change on the way that all sole traders need to be aware of. From 6th April 2026, over 860,000 sole traders and landlords earning more than £50,000 will need to use Making Tax Digital for Income Tax, sending quarterly updates to HMRC through recognised software rather than filing a single annual return.
If your income is below £50,000 right now, you’re not affected yet – but the threshold drops to £30,000 in 2027 and is expected to fall further after that. It makes sense to start keeping digital records now, even if you’re not yet required to. HMRC has confirmed that no penalty points will be given for late quarterly updates in the first 12 months for those joining Making Tax Digital from April 2026.
Self assessment doesn’t have to be stressful. I’ve helped sole traders across Scotland and the UK get their returns filed correctly, on time, and with every allowance claimed – and I always respond the same day if you have a question. If you want to talk through your situation, just drop me a message or book a free call.
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AAT qualified accountant based in Strathaven. Personal, one-to-one accounting for small businesses and sole traders across the UK.