Self Assessment Tax Return for Sole Traders: A Step-by-Step Guide

If you’re a sole trader filing your Self Assessment tax return for the first time, it can feel daunting. The good news: it’s more straightforward than it looks, and once you’ve been through it once, it gets significantly easier every year.

This is a step-by-step guide to completing your Self Assessment tax return online — from logging into HMRC to hitting submit. No jargon, no unnecessary complexity, just what you actually need to know.

Disclaimer: I’m a Chartered Accountant, but I’m not your accountant. This guide is for information and guidance purposes only. Everyone’s situation is different — if you’re unsure about anything specific to your circumstances, speak to a qualified professional.

Note: This guide covers the traditional Self Assessment process for sole traders earning under £50,000. If your gross income exceeds £50,000, Making Tax Digital now applies to you — read the MTD guide here →

Before You Start: The Key Deadlines

Get these in your diary before anything else:

The online deadline is always 31 January — three months later than the paper deadline. Almost everyone files online, and for good reason: it’s faster, HMRC calculates your bill automatically, and you get three extra months.

Miss the 31 January deadline and HMRC issues an automatic £100 penalty — even if you have no tax to pay. Miss it by more than 3 months and the penalties escalate quickly. File on time, every time.

Tip: The earlier you file, the sooner you know your tax bill — and the more time you have to budget for it. Members of The Self Employed Club get deals on accounting software that keeps your records ready to go well before January. Browse deals →

Can you file early? Yes — the tax return for the 2025/26 tax year (6 April 2025 to 5 April 2026) is available to file from 6 April 2026. Filing early doesn’t mean paying early — you don’t owe anything until 31 January 2027. But filing early means you know your bill months in advance, which makes budgeting significantly easier.

Who Needs to File a Self Assessment Tax Return?

If you’re a sole trader who earned more than £1,000 from self-employment in the 2025/26 tax year, you need to file a Self Assessment tax return.

You also need to file if you:

• Earned more than £150,000 in total income
• Have income from property rental
• Have untaxed investment income or dividends above the allowance
• Need to pay the High Income Child Benefit Charge (if you or your partner earns over £60,000)
• Are employed and self-employed

If your self-employment income is under £1,000, the trading income allowance may mean you don’t need to file — but check your full circumstances first.

Read => How to Register as Self-Employed in the UK

What You Need Before You Start

Getting everything together before you log in makes the process much faster. Here’s what to have ready:

Personal details:

• Your UTR number (Unique Taxpayer Reference — 10 digits, in any letters from HMRC)
• Your National Insurance number
• Your Government Gateway user ID and password

Business income and expenses:

• Total business turnover (income before expenses) for the tax year
• Total allowable business expenses for the year — ideally broken down by category
• Your profit and loss summary if you use accounting software

Other income (if applicable):

• P60 or P45 if you were also employed
• Bank interest received
• Dividend income
• Pension income
• Any other untaxed income

Payment details:

• Your bank account details if you’re due a refund
• Card or bank details to pay any tax owed

The easiest way to have this information ready: Good accounting software keeps your income and expenses organised throughout the year, so when January comes, your numbers are already in order. Members of The Self Employed Club get 90% off Xero for 6 months — grab the deal here →

Read => Xero for Sole Traders: Is It Actually Worth It?

Step 1: Log Into Your HMRC Government Gateway Account

Go to gov.uk/log-in-file-self-assessment-return and sign in with your Government Gateway user ID and password.

If you’ve forgotten your user ID or password, HMRC has a recovery process on the same page. Have your UTR and National Insurance number to hand — you’ll need them to verify your identity.

Once logged in, go to Self Assessment and select Complete your tax return for the relevant tax year.

Step 2: “Tell Us About You”

The first section asks you to check and confirm your personal details — name, address, date of birth, National Insurance number.

Most of this will be pre-populated if HMRC already has it on file. Check it carefully and correct anything that’s changed — particularly your address if you’ve moved.

Optional fields like phone number and email address are useful to add if you haven’t already — HMRC will use them to contact you if there’s a query about your return.

What to do:

• Check all personal details are correct
• Confirm you’re a UK resident
• Add student loan repayment details if applicable (your plan type and whether you’re employed or self-employed)
• Tick blind person’s allowance if you’re entitled to it

Step 3: “Tailor Your Return”

This section tells HMRC what types of income you received during the year. You won’t enter any numbers here — it just generates the right sections for you to fill in later.

Page 1 — Sources of income:

• Select Yes for self-employment and enter the number of businesses you run and their names
• Select Yes for employment if you had any PAYE employment during the year
• Select any other income types that apply (property, partnerships etc.)

If your self-employment turnover is under £1,000: You can choose to use the trading income allowance instead of declaring income and expenses separately. Note that if you do this, you can’t claim expenses, voluntary NI contributions, or certain benefits — so only use it if your expenses are also under £1,000.

Page 2 — Other income:

• Tick if you received bank interest, dividends, pension income, or Child Benefit (if relevant for the High Income Charge)
• Add pension contributions you’ve made — this gives you additional tax relief

Page 3 — Tax reliefs:

• Any other reliefs you want to claim (Gift Aid donations, venture capital trusts, etc.)

Step 4: Complete the Self-Employment Section

This is the core section for sole traders — where you enter your business income and expenses for the year. It’s also where most people slow down, so it’s worth taking it section by section.

Short Form (SA103S) vs Full Form (SA103F)

If your turnover is under £90,000: You can use the short self-employment pages (SA103S). You enter your total income and a single total figure for all allowable expenses — no category breakdown required. Much quicker.

If your turnover is £90,000 or over: You must use the full pages (SA103F) and break expenses down into HMRC’s specific categories.

Preliminary Questions

Before you enter any numbers, HMRC asks a series of questions to understand your business setup. Most sole traders can answer no to most of these. The ones most likely to apply:

“I wish to use the cash basis” — the cash basis means you record income when you receive it and expenses when you pay them, rather than when they’re invoiced. It simplifies bookkeeping and is the default for most sole traders. If you used it last year, continue using it. If you’re unsure, read this guide to the cash basis.

“I am a foster or adult placement carer” — tick if this applies. Different rules apply to foster carers.

“I wish to claim averaging adjustment” — for farmers, market gardeners, and creators of literary or artistic works who receive lumpy income (like book advances). Allows income to be spread across two years.

“My total turnover is £1,000 or less but I wish to pay voluntary Class 2 NICs” — if your turnover is under £1,000 and you’re using the trading allowance, tick this if you want to protect your State Pension entitlement by paying voluntary Class 2 contributions (£3.65/week for 2026/27).

Declaring Your Business Turnover

Your turnover is your total business income before expenses — not your profit. It includes everything you were paid for your work during the tax year:

• Invoices paid by clients
• Cash payments received
• Payments via PayPal, Stripe, or other platforms
• Any expenses you recharged to clients (include these in turnover, then claim them back as expenses — they cancel out)

What doesn’t go in turnover:

• Bank interest (goes in the savings section)
• Dividend income (goes in the investments section)
• Rental income (goes in the property section)

Other business income — money earned through your business that isn’t your core trading income goes in a separate “other business income” box. For example, subletting part of your office space.

Claiming Your Business Expenses

If you’re using the short form (turnover under £90,000), add up all your allowable expenses and enter the total in one box.

If you’re on the full form, you’ll fill in HMRC’s expense categories — things like staff costs, premises costs, travel, advertising, and professional fees.

Either way, only include expenses that are wholly and exclusively for business purposes. Mixed-use expenses (phone, broadband, home office) should be the business proportion only.

If you claimed the Trading Income Allowance (turnover under £1,000), leave the expenses box blank — you can’t claim expenses and the allowance at the same time.

Not sure what you can claim? Read the full list of allowable expenses for sole traders →

Claiming Capital Allowances

If you bought equipment, tools, vehicles, or machinery for your business during the year, you may be able to claim capital allowances — a tax deduction for the cost of those assets.

The most useful one for most sole traders is the Annual Investment Allowance (AIA), which lets you deduct 100% of the cost of qualifying equipment in the year you buy it, up to £1 million. In practice, this means most equipment purchases can be fully deducted in the year of purchase.

Note: If you’re using the cash basis, you can’t claim capital allowances on most assets — the exception is cars. On the cash basis, you’d instead claim the actual cost of equipment as an expense in the year you pay for it.

Goods or Services for Personal Use

If you’ve taken any stock out of your business for personal use, or if any of your claimed expenses included personal costs you haven’t already adjusted for, note the value here. HMRC adds it back to your profit. If you’ve already removed personal use from your expense calculations, leave this blank.

Tax Losses

If your business made a loss this year (expenses exceed income), you have four options:

1. Carry it forward — offset the loss against future profits. Most common choice.
2. Carry it back — offset against profits from a previous year and potentially get a tax refund.
3. Set it against other income — if you have employment income or other taxable income in the same year, you may be able to offset the loss against it.
4. Set it against capital gains — in certain circumstances.

You can’t use options 2 or 3 if you’re on the cash basis.

Tax losses are a valuable relief — don’t ignore them if your business has had a difficult year. The loss carry-forward is particularly useful for sole traders in the early stages whose business costs exceed initial income.

CIS Deductions (Construction Industry Scheme)

This section only applies if you’re a registered CIS subcontractor. If contractors have deducted CIS tax from your payments during the year, enter the total here. Make sure your turnover figure includes the gross amount (before CIS deductions) — the deductions are then credited against your tax bill.

Class 4 National Insurance Exemption

Most sole traders pay Class 4 NIC automatically through Self Assessment. But you may be exempt if you were at or over State Pension age on 6 April 2025, or under 16. If an exemption applies, tick the relevant box — otherwise leave it blank and HMRC calculates your Class 4 NIC automatically based on your profit.

Members of The Self Employed Club get 90% off Xero for 6 months — accounting software that keeps your income and expenses organised year-round so filling in this section takes minutes rather than hours. Grab the deal →

Step 5: Complete Any Other Sections

Depending on what you ticked in the Tailor Your Return section, you may have additional pages to complete:

Employment (SA102): If you were also employed during the year, enter the figures from your P60 or P45 — your gross pay and the tax deducted by your employer.

UK property income (SA105): If you received rental income, enter it here along with any allowable property expenses.

Savings and investments: Enter bank interest and dividend income in the relevant boxes. The personal savings allowance (£500 for higher rate taxpayers, £1,000 for basic rate) and dividend allowance (£500) mean many people won’t owe extra tax on these — but you still need to declare them.

Pension contributions: If you made personal pension contributions, enter the gross amount (what you paid plus the tax relief added by your provider). This gives you additional tax relief at your marginal rate.

Step 6: Review “Tax Calculation”

Before you submit, HMRC shows you a summary of your tax calculation — your total income, total deductions, taxable profit, and the tax and National Insurance you owe.

Check this carefully:

• Does your profit figure look right?
• Is the tax calculation in line with what you expected?
• Are there any payments on account shown? (These are advance payments towards next year’s bill — if your tax bill is over £1,000, HMRC adds two payments on account to your January bill, due in January and July)

If anything looks wrong, go back and check your entries. Common errors include entering turnover in the expenses box, entering income twice, or forgetting a category of income.

Read => Self-Employed Tax: How It Works and What You Need to Know

Step 7: Submit Your Return

Once you’re happy with the calculation, proceed to the final submission screen. You’ll see a declaration confirming the return is correct to the best of your knowledge — read it, confirm it, and submit.

HMRC will send you a confirmation with a submission reference number. Screenshot or note this down — it’s your proof of filing.

Your return is now submitted. HMRC will process it and any questions will come by letter to your registered address.

Step 8: Pay Your Tax Bill

Filing and paying are two separate things. You can file in April and not pay until January — and many people do exactly this so they know their bill well in advance.

Payment deadline: 31 January 2027 for the 2025/26 tax year.

Ways to pay:

• Online banking / bank transfer — HMRC’s bank details are on your bill and at gov.uk/pay-self-assessment-tax-bill
• Direct debit — set up via your HMRC online account
• Debit card — pay online through your HMRC account
• BACS, CHAPS — for same-day or next-day payments

Allow enough time: Online banking payments usually clear the same or next day. Allow more time for any other method.

Don’t have a dedicated tax savings pot yet? A separate business bank account with savings spaces makes setting aside your tax bill automatic. Check business banking deals in The Self Employed Club →

Payments on account: If your bill is over £1,000, HMRC also requires two advance payments towards the following year — 50% in January (added to your current bill) and 50% in July. This catches many first-year filers by surprise. If you know your income is likely to be significantly lower next year, you can apply to reduce your payments on account through your HMRC account.

What If You Can’t Pay Your Tax Bill?

Don’t ignore it. HMRC has powers to escalate unpaid debt quickly — but they will work with you if you engage early.

Time to Pay arrangement: Contact HMRC once your return is filed and ask about spreading your bill over monthly instalments. You need to have filed your return before they’ll set this up. Call 0300 200 3822 or apply online through your HMRC account.

Read => Self-Employed Tax: How It Works and What You Need to Know

What If You Made a Mistake?

You can amend a submitted Self Assessment return within 12 months of the 31 January filing deadline. Log into your HMRC account, go to Self Assessment, and select the option to amend your return. HMRC will recalculate your bill automatically.

If you need to make a correction after the 12-month window, you’ll need to write to HMRC directly.

What If You Earn Over £50,000 and Are on MTD?

From April 2026, sole traders with gross income over £50,000 are now required to use Making Tax Digital (MTD) rather than the traditional Self Assessment process.

Under MTD, instead of one annual tax return you submit four quarterly updates throughout the year, plus a Final Declaration by 31 January instead of a traditional tax return. The Final Declaration covers the same ground as a Self Assessment return — it’s just submitted through your MTD-compatible software rather than the HMRC website directly.

If you’re below the £50,000 threshold, this guide applies to you as normal. MTD extends to income over £30,000 from April 2027 and over £20,000 from April 2028.

Read => Making Tax Digital: What’s Changed and What You Need to Do

Make Next Year Easier

The best time to prepare for your next tax return is right now — not next January.

Three habits that make Self Assessment significantly less stressful — and one of them involves the Club:

1. Track income and expenses monthly — 20 minutes a month beats 12 hours in January. Accounting software does most of this automatically.

2. Set aside 25–30% of every payment for tax — into a separate pot, immediately, every time. Don’t touch it until January.

3. File early — you can file from April 6. The sooner you file, the sooner you know your bill and the more time you have to plan for it.

Get the tools to make this easier: Members of The Self Employed Club get 90% off Xero for 6 months — MTD-compatible accounting software that keeps your records organised year-round. Grab the deal →

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