Self Assessment Tax Returns: A Complete Guide for Sole Traders and Freelancers

Published by Westridge Accountants | Quality, Affordability & Convenience

If you’re self-employed as a sole trader or freelancer, completing a Self Assessment tax return is one of your most important annual responsibilities. Yet many people find it confusing, stressful, or simply leave it too late — resulting in unnecessary penalties.

This guide walks you through everything you need to know: who needs to file, what deadlines to meet, what you can claim, and how to avoid the most common mistakes.

Who Needs to Complete a Self Assessment Return?

HMRC requires you to register for Self Assessment if, in the last tax year, you:

Were self-employed as a sole trader and earned more than £1,000 (before expenses)
Were a partner in a business partnership
Earned more than £100,000 in total income
Had income from property (rental income)
Received income from abroad
Had untaxed income from savings, investments, or dividends above certain thresholds
Received Child Benefit and either you or your partner earned over £60,000

If this is your first year of self-employment, you must register with HMRC by 5 October following the end of the tax year in which you started trading.

Key Deadlines to Know

Missing HMRC deadlines triggers automatic penalties, so these dates are non-negotiable:

Deadline	What It Covers
5 October	Register for Self Assessment (new taxpayers)
31 October	Submit paper tax return for the previous tax year
31 January	Submit online tax return AND pay any tax owed
31 July	Second payment on account (if applicable)

The 31 January deadline is the big one. This is both the filing deadline for online returns and the payment deadline. Miss it and you’ll face an immediate £100 penalty — even if you have no tax to pay.

What Tax Will You Owe?

As a sole trader, your tax bill is calculated on your net profit — that is, your total income minus your allowable business expenses.

For the 2025/26 tax year, the key rates are:

Personal Allowance: £12,570 — you pay no Income Tax on the first £12,570 of profit
Basic Rate (20%): applies to profit between £12,571 and £50,270
Higher Rate (40%): applies to profit between £50,271 and £125,140
Additional Rate (45%): applies to profit above £125,140

On top of Income Tax, most sole traders also pay Class 4 National Insurance Contributions:

6% on profits between £12,570 and £50,270
2% on profits above £50,270

Payments on Account Explained

If your tax bill exceeds £1,000, HMRC requires you to make payments on account — advance payments towards next year’s bill. These are split into two instalments:

First payment: 31 January (along with any balancing payment for the previous year)
Second payment: 31 July

Each instalment is 50% of the previous year’s tax bill. This catches many first-time filers off guard, as your first January bill can be 150% of what you expected — the actual tax owed, plus the first payment on account for the following year. Good bookkeeping throughout the year helps you plan for this.

What Can You Claim as a Business Expense?

One of the biggest advantages of being self-employed is the ability to reduce your taxable profit by claiming allowable business expenses. These must be costs incurred “wholly and exclusively” for business purposes.

Common allowable expenses include:

Office costs (stationery, phone bills, postage)
Travel costs (fuel, public transport, parking — but not commuting from home to a fixed office)
Work clothing (uniforms or protective gear — not everyday clothing)
Staff costs (wages, subcontractor payments, pension contributions)
Marketing and advertising (website, business cards, social media ads)
Professional fees (accountancy, legal advice)
Business insurance
Training courses directly related to your trade

Using your home as an office: If you work from home, you can claim a proportion of your household bills (broadband, heating, electricity) or use HMRC’s simplified flat rate of £10–£26 per month depending on hours worked.

The £1,000 Trading Allowance: If your gross trading income is £1,000 or less, you don’t need to complete a return and have no tax to pay. If your income is above £1,000, you can still claim the £1,000 allowance as a flat deduction instead of itemising actual expenses — useful if your expenses are low.

Making Tax Digital for Income Tax (From April 2026)

From April 2026, self-employed individuals and landlords with combined income over £50,000 will be required to use Making Tax Digital (MTD) software and submit quarterly updates to HMRC, instead of a single annual return. Those with income between £30,000 and £50,000 will follow from April 2027.

This is a significant change. If you fall into these thresholds, now is the time to start using cloud accounting software (such as Xero or QuickBooks) and get organised. Westridge Accountants can help you get MTD-ready well ahead of the deadline.

Common Mistakes That Trigger HMRC Enquiries

Missing the registration deadline — you must register by 5 October after your first year of trading
Not keeping records — HMRC can ask to see receipts and bank statements going back 5 years
Claiming personal expenses as business — only costs wholly for business are allowable
Forgetting bank interest and savings income — all income must be declared
Mixing business and personal bank accounts — makes record-keeping far harder

How Westridge Accountants Can Help

Filing your Self Assessment return accurately and on time doesn’t have to be stressful. At Westridge Accountants, we prepare and file your return on your behalf, identify every allowable expense to minimise your tax bill, calculate your payments on account so there are no surprises, and advise on tax planning to keep more of what you earn.

Our fees are fixed and transparent — Self Assessment returns from just £100. We’re available 7 days a week, 8am to 10pm.

Ready to take the stress out of your tax return? Contact us at info@westridgeaccountants.co.uk or visit www.westridgeaccountants.co.uk

This article is for general guidance only and does not constitute personalised tax advice. Tax rules can change and individual circumstances vary. Please contact Westridge Accountants for advice tailored to your specific situation. Westridge Accountants Ltd is regulated by AAT and supervised by AAT for Anti-Money Laundering purposes.

Frequently Asked Questions

Do I need to complete a Self Assessment if I’m employed but have side income?

Yes — if your side income (such as freelance work, rental income, or self-employment) exceeds £1,000 in a tax year, you must register for Self Assessment and declare it to HMRC, even if you’re already taxed through PAYE.

What happens if I miss the 31 January Self Assessment deadline?

You will receive an automatic £100 penalty even if you have no tax to pay. Further daily penalties of £10 per day apply after 3 months, and additional surcharges after 6 and 12 months. Interest also accrues on any unpaid tax.

What is a payment on account in Self Assessment?

If your tax bill exceeds £1,000, HMRC requires advance payments towards next year’s bill — 50% on 31 January and 50% on 31 July. First-time filers are often caught off guard as their January bill can be 150% of what they expected: the prior year’s tax plus the first payment on account.

Can I claim my mobile phone bill as a business expense?

Yes, but only the business-use proportion. If you use your phone 60% for work, you can claim 60% of the bill. If you have a dedicated business phone used entirely for work, you can claim 100% of the cost.

When is the deadline to register for Self Assessment for the first time?

If you became self-employed or received untaxed income during the 2024/25 tax year, you must register with HMRC by 5 October 2025. Registering late can itself attract a penalty.