Self Assessment Tax Return for Sole Traders

September 20, 2022by Admin

Self-assessment Tax Return for Sole Traders

Suppose you are self-employed or are evaluating beginning a new venture. In that case, becoming a sole proprietor is usually the most straightforward and inexpensive way to start and run a successful business. It allows you to run your business how you desire to, but it’s important to note that you are liable for your private and business debts for victory and failure. 

Sole proprietors should apply for the HMRC exclusive trader self-assessment tax return and sustain their accounting records most accurately; this means that sole traders are not mandated to register their company with the company house. 

As a sole trader, your income tax must be dealt with annually, and you must file a self-assessment tax return with the HRMC. In this guide, you will find more information about how you can register, file, and maintain your tax returns as a sole proprietor. 

What is a ‘Self-assessment Tax Return’? 

A self-assessment tax return is a method of notifying the HMRC about your business. How much revenue it has made during a specific period (annual earning) and how much tax you must reimburse. You must complete and submit your tax returns to the HMRC by January 31st each year (if a paper tax is not present). To do this, the self-employed and business partners must fill out the SA100 form, which takes other accumulating sources (such as real estate) and capital. 

Read more about Self Assessment

How Do Sole Traders and Self-employed People Differentiate from Each Other? 

All self-employed people are not considered sole traders. However, if you are a sole trader, you are deemed self-employed and must present an annual HMRC self-assessment. On the other hand, if you are self-employed but your business is a partnership or GmbH organisation, you will not be seen before as a sole proprietor. 

What is the Registration Method for a Self-assessment? 

Whether you are self-employed or want to register as a partnership business, you can find various methods to sign up for the HMRC self-assessment tax return. The registration of a self-employed person relies on whether he has previously filed a tax return with HMRC or not. 

How to file a tax return if it’s your first time: 

Below we have listed the steps you must pursue if it’s your first time applying for a self-assessment tax return: 

    • Firstly, you must enlist your self-assessment and class 2 social security via your corporate tax account. For this, you will require your government gateway username and password to get access to your account. If you don’t have a corporate account, you will need to initiate one. 
    • On accepting your registration, you will receive your identification taxpayer number through an official letter within ten days (21days for international cases). You will need this identification number, also known as the unique taxpayer reference (UTR) number, to submit a tax return. 
    • You will then acquire a reminder letter or email to remind you to submit your returns by the due date. 

Is it Necessary to File a Self-assessment Tax Return?

You must file a self-assessment tax return, especially if you are a self-employed or sole trader. If a corporation employs you, the PAYE automatically deducts the tax amount from your earnings each month. Your monthly payslips deliver proof of the taxes and national insurance you have paid, along with other deductions such as pensions and loans. 

However, when you are a sole trader and owner of your business, it becomes burdensome for the HMRC as they have no way to keep a ledger of your income and taxes. Hence they rely on the self-assessment method. Furthermore, you are accountable for notifying the HMRC of your income for them to calculate your annual taxes. If your income is less than £1000 annually from any of your businesses or sources of income, then there is no need to file a self-assessment tax return. 

How Should a Self-assessment be Filed- Online or Post?

  • Tax return online

Filing your taxes online has been one of the simplest and quickest options, and it has become obligatory for many corporations since 2022. The UK government proclaimed that any corporation with a taxable income of £85,000 or less would have to file their taxes through ‘making tax digital (MTD) for their tax return after April 2022. Online tax payments are your best choice if you fall under the above ailments. The HMRC also intends to start an online system with MTD by April 2024; this would mean that any self-reliant business will have to keep virtual records of their earnings and expenses. By 2024 online tax payments may be the only option available. 

  • Tax returns via post

If your business has a taxable earning of over £85,000, you can complete your paper tax return and mail it to HMRC. The complete forms can be found, used, printed, and satisfied. However, the due date for submissions of papers via post is earlier than online bids (October 31st instead of January 31st), and you must also consider the additional delivery time. 

How Much Tax Should a Sole Trader be Ready to Pay? 

In terms of sole traders, they will need to pay two types of taxes: 

  1. Income tax

After deducting your allowance from your income, the remaining amount is taxable. The average personal budget is usually £12,570, which is tax-free. Applying for a marriage allowance or the blind allowance may result in an increased individual subsidy; however, if your income is 10 million or more, it will be decreased. 

  1. Class 2 and 4 national insurance contributions (NICs)

If you run a business earning a profit of £6,725 or more, you will have to pay class 2 NICs. Furthermore, if your business profits are £11,909 or more, you will be anticipated to pay class 4 NICs, an estimate of the percentage of your overall earnings from your self-assessment. 

What is the Procedure to Pay Taxes for a Sole Trader? 

Once you have finalised your annual self-assessment and computed the taxes you owe, you can now pay in several ways, such as: 

  • Debit card 
  • Credit card
  • Online banking
  • CHAPs 

For a Sole Trader, What Are the Deadlines for a Self-assessment? 

When you file your tax return, they’re not established on the calendar year but on the tax year. For instance, the tax year 2022/23 would be from April 6th, 2022, to April 5th, 2023. Below have listed significant deadlines that you must keep in mind for the tax year 2022/23:

  • October 5th, 2023, is the last date to submit the paper self-assessment tax return if it’s your first time.
  • For filing a self-assessment tax return, the deadline is 31st October 2023.
  • For online filing, the deadline is January 31st, 2024.
  • Taxes are expected to be paid by midnight on January 31st, 2024.
  • You may face penalties if you cannot meet even one of these deadlines. 


You must pay taxes whether employed, self-employed, or a sole trader. You are required to submit a self-assessment tax return to the HMRC, which can be a tricky process, and it’s not always effortless to understand what costs are tax deductible and what can be conserved. You may miss your tax savings if you try to do it yourself. That is why it’s always a reasonable idea to hire a trustworthy accountant to discuss your costs with you and show you all the areas that give you potential savings on your taxes. Your accountant can also help you register as a sole trader and show you how to meet the prerequisites to comply with HMRC and avoid unnecessary penalties. 



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