A Plain-English Guide to Self Assessment for Sole Traders
“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.”
If you work for yourself and have no idea where to start with self assessment, you are not alone and you are not behind the curve. This guide walks you through exactly what self assessment involves for sole traders, when you need to act, what you can claim, and what happens if you have already missed a deadline.
Why self assessment matters more than ever for sole traders
Self assessment is the system HMRC uses to collect income tax and National Insurance from people whose tax is not deducted automatically by an employer. If you are a sole trader, even with modest earnings, you are responsible for calculating and paying your own tax. Getting this wrong, or ignoring it, leads to automatic penalties from HMRC regardless of whether you owe any tax at all.
The rules are also changing significantly. From 6 April 2026, sole traders earning more than £50,000 from self-employment must start using HMRC-recognised software to keep digital records and send quarterly updates under Making Tax Digital for Income Tax. If you are in that bracket, the annual return alone is no longer the only filing obligation you have.
From 6 April 2026, over 860,000 sole traders earning above £50,000 must report income quarterly to HMRC under Making Tax Digital for Income Tax. Those joining in April 2026 will not receive penalty points for late quarterly updates during the first 12 months, but the requirement to file is still active from day one. Source: GOV.UK.
Where most sole traders go wrong with self assessment
The most common problems are not complicated. They are timing issues and missing records, both of which are entirely avoidable with a small amount of planning. Forum discussions among sole traders consistently flag the same two stressors: disorganised paperwork and uncertainty over which expenses are allowable.
Registering too late
You must tell HMRC you are self-employed by 5 October following the end of the tax year in which you started trading. If you started trading between 6 April 2025 and 5 April 2026, your registration deadline is 5 October 2026. Missing this date means HMRC may charge a penalty even before you have filed anything.
Missing allowable expenses
Many sole traders significantly overpay tax because they do not claim everything they are entitled to. Allowable expenses include business mileage, home office costs, professional subscriptions, equipment, and accountancy fees among others. The official HMRC SA103F guidance notes set out what qualifies, but they are written for people who already understand the system.
“Most sole traders I speak to have been sitting on this for weeks. Once we go through the numbers together, the actual tax bill is nearly always less than they feared and the process is straightforward when someone walks you through it.”
What to do: a step-by-step process for sole traders
Self assessment is a sequence of actions, not a single event. Breaking it into stages makes it manageable. Most sole traders can work through the first two steps in an afternoon.
- Step 1: Register for Self Assessment with HMRC. Go to gov.uk/register-for-self-assessment and select the ‘self-employed’ option. You will need your National Insurance number and contact details. HMRC will post your Unique Taxpayer Reference (UTR) number within 10 working days. You cannot file a return without it.
- Step 2: Gather your records for the full tax year (6 April to 5 April). This means all income received, all business expenses with receipts or bank records to support them, any CIS deductions if applicable, and details of any other income sources. If your records are incomplete, start with your bank statements and work backwards.
- Step 3: File your return and pay what you owe by 31 January following the end of the tax year. For the 2024 to 2025 tax year, the online filing deadline is 31 January 2026. The paper deadline is 31 October 2025. If you are earning above £50,000 and fall under Making Tax Digital from April 2026, you will also need to file quarterly updates using compatible software from that date.
If you have already missed a filing deadline, do not wait any longer. A late return penalty starts at £100 on the day after the deadline, and further charges are added at three months, six months, and twelve months. Filing now, even if late, stops the penalties from continuing to build.
Costs and what to expect
There are two costs to consider: the tax itself and the cost of preparing the return. Your tax bill depends on your profit after allowable expenses, not your total income. The personal allowance for 2025 to 2026 is £12,570, so you pay no income tax on profit below that figure. Above it, the basic rate is 20% up to £50,270. You also pay Class 4 National Insurance at 6% on profits between £12,570 and £50,270. If you use an accountant, the cost of that service is itself an allowable expense, which reduces your tax bill.
| Option | Pros | Cons |
|---|---|---|
| DIY self assessment | No accountancy fee to pay | High risk of missing allowable expenses or filing errors, which can cost more in overpaid tax or HMRC penalties than an accountant would charge |
| Using an accountant | Accurate filing, all legitimate expenses claimed, deadlines tracked, questions answered directly | Annual or monthly fee, though this is itself a deductible business expense |
How to get started today
The single biggest mistake is waiting. Whether you are not yet registered, mid-year with no records, or past a filing deadline, the right move is to take one action today and work forward from there. If you are unsure where you currently stand, a short call with an accountant who handles sole trader returns regularly will give you a clear picture within minutes.
- If you are not yet registered: go to gov.uk/register-for-self-assessment now and complete your registration. It takes around 15 minutes and your UTR will arrive by post within 10 working days.
- If you are already registered but have not filed: open your bank statements for the relevant tax year, note every payment received and every business-related cost, and either file yourself via your HMRC online account or pass the figures to an accountant who can do it for you at a fixed fee.
Ready to sort your self assessment return?
David handles sole trader self assessment returns at a fixed price, claiming every allowable expense and filing on time with HMRC. There is no tie-in contract and you can book a free 20-minute call to discuss your situation before committing to anything.
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AAT qualified accountant based in Strathaven. Personal, one-to-one accounting for small businesses and sole traders across the UK.