Self Assessment Tax Return for Sole Traders: A Plain-English Guide (2026)

If you run a business as a sole trader, you file a Self Assessment tax return every year. This guide cuts through the jargon.

What is Self Assessment?

It's a form you submit to HMRC once a year telling them:

How much you earned.
How much you spent on business costs.
What your profit was (income − costs = profit).
How much tax you owe on that profit.

HMRC already knows roughly what you earned (from invoices, employers, banks), so Self Assessment is essentially you confirming (or correcting) their numbers.

Who has to file

You must file a Self Assessment if you:

Are self-employed (sole trader or partnership).
Earn more than £1,000 from self-employment in a tax year.
Are a company director.
Have income from rent, investments, or overseas.
Earn over £100,000 in any year.

Most tradespeople fall into the first category. The income threshold (£1,000) is so low that almost any side gig triggers it.

Key dates

Date	What
6 April	New tax year starts
31 October	Paper return deadline (don't bother, file online)
31 January	Online return deadline
31 January	Payment deadline for any tax owed

Critical: the 31 January deadline applies to BOTH filing AND payment. If you owe £2,000 in tax, you must pay it by 31 January — even if you've filed your return in October.

For payments on account (if your last bill was over £1,000), there's a second payment due by 31 July.

What goes on the form

The Self Assessment has about 12 pages, but for a sole trader you only fill in a few boxes:

Turnover — total invoices issued in the tax year.
Business expenses — total of all allowable business costs.
Profit — turnover minus expenses.
Adjustments — anything that affects your tax bill (e.g. capital allowances, losses from previous years).

You also fill in your personal details, bank interest, and any other income.

Most of the time, your accountant or software fills this in for you. But you should understand it so you can spot mistakes.

What's "allowable" as a business expense

HMRC's rule is: an expense is allowable if it is wholly and exclusively for business.

Examples of allowable expenses for tradespeople:

Materials bought for jobs
Tools and equipment (usually capital allowances)
Van running costs (fuel, insurance, MOT, tax, lease)
Work clothing (not everyday clothes)
Public liability insurance
Professional fees (accountant, software subscriptions)
Marketing (business cards, website, advertising)
Phone and broadband (business-use portion)
Training and certifications
Bank charges on business accounts
Subcontractor payments

Examples of not allowable:

Clothing you can also wear outside work (jeans, hoodies, generic jackets)
Travel between home and your usual workplace
Client entertaining (now allowable since 2023 but with restrictions)
Personal phone/internet bills in full

When in doubt, keep the receipt and tag it as business. HMRC rarely challenges small expenses if you can justify them.

How to actually pay HMRC

You have three options:

Online bank transfer (BACS / Faster Payments). Use your Self Assessment 11-digit payment reference.
Direct debit (set up via your HMRC online account). Cleared by the deadline.
Cheque in the post — avoid this, it's slow and risky.

HMRC's bank details change occasionally. Always check the latest ones in your HMRC online account before paying.

What happens if you file late

Up to 3 months late: £100 penalty.
3–6 months late: £10 per day, up to £900.
6–12 months late: £300 or 5% of tax due (whichever's higher).
Over 12 months late: £300 or 5% of tax due (whichever's higher). Serious cases trigger an investigation.

If you can't pay by 31 January, file anyway and call HMRC to set up a Time to Pay arrangement. Filing late is punished; paying late can usually be negotiated.

Common mistakes

Forgetting payments on account. If your previous year's bill was over £1,000, you owe half again by 31 July. New sole traders often miss this.
Mixing personal and business bank accounts. Makes your return a nightmare. Use a separate business current account.
Not keeping receipts. HMRC can ask to see proof of every expense for up to 5 years after filing.
Forgetting CIS deductions. If you work as a subcontractor under CIS, your tax bill is reduced by what was already deducted at source.

How GraftLog helps

GraftLog tracks all your invoices and expenses throughout the year, organised by UK tax year quarters. At year-end you can:

Export everything as a CSV ready for your accountant.
See your total turnover, expenses, and estimated profit in one place.
Hand the CSV to your accountant — they do the Self Assessment in 30 minutes instead of 3 hours.

Start tracking your tax year in GraftLog →