Self Assessment for New Sole Traders: The Year Explained
A beginner's overview of how the Self Assessment year works, what the key stages look like and how to avoid a last-minute scramble.
Self Assessment is the system HMRC uses for people who earn income outside of regular payroll. For a self-employed cleaner, handyman or beauty professional, it is where you report what you earned, claim allowable costs and work out what tax and National Insurance you owe.
The word "assessment" sounds intimidating, but the process is a form you complete once a year. The difficulty is not complexity; it is timing and organisation. This guide gives a general overview. Dates and thresholds change, so confirm them on gov.uk.
How the tax year works
The UK tax year does not match the calendar year. It runs from early April to early April. Your return covers the whole of that period, even if you only started trading part-way through.
Roughly, the year looks like this:
- During the tax year: you work, earn and keep records.
- After it ends: you gather your figures and prepare the return.
- Filing deadline: there are separate deadlines for paper and online returns, and online is the more generous of the two.
- Payment deadline: tax owed is generally due by a set date after the year ends, and further payments on account may apply.
Check the exact dates on gov.uk and put them in your calendar the moment you register.
What goes on the return
For a sole trader, the self-employment section typically asks for:
- Total income from your business
- Allowable business expenses, or the trading allowance if you use that instead
- Resulting profit
- Any other relevant income or reliefs
HMRC then calculates income tax and National Insurance based on your profit and personal circumstances. You are taxed on profit, not turnover. That is why good records matter: more accurately recorded costs mean a fairer profit figure.
Payments on account, in plain language
Many sole traders are surprised by "payments on account". In general terms, HMRC may ask you to pay part of next year's tax in advance, in two instalments, based on this year's bill. That can make your first return feel like a double hit because you pay the balance for the year just ended and a first instalment towards the next.
The practical lesson: save for tax as you go. Many providers move a percentage of every payment into a separate savings pot. Speak to an accountant about a sensible percentage for your situation, since it depends on profit and other income.
A month-by-month rhythm for new traders
You can simplify the year by thinking in blocks:
- Every week: log income and costs (15 minutes).
- Every month: reconcile your business account with your records and move money into your tax pot.
- Every quarter: review profit, check whether your rates still cover costs, and check approaching deadlines.
- After the year ends: pull totals, assemble paperwork, and file well before the deadline.
Getting help
You can file yourself through your online HMRC account. If your affairs are simple, many people do. An accountant may be worth the fee if you have several income sources, are close to a VAT threshold, have employees or have made significant purchases. See also when VAT registration matters.
Be careful of anyone who guarantees a tax saving or asks for a fee based on a share of the refund without clear terms, and of messages claiming to be from HMRC asking for personal details. Genuine contact is made through official channels.
Mistakes that cost new traders money
- Missing the registration deadline. Registering late can lead to penalties; see how to register as a sole trader.
- Spending the money. Revenue is not profit, and tax is not optional.
- Claiming personal costs. Costs must be wholly and exclusively for business, or properly apportioned.
- Forgetting other income. Employment, savings and rental income may also need reporting.
- Leaving it all to the last week. Online systems can be slow near deadlines, and you may need documents you have to chase.
If you cannot pay on time
Contact HMRC as early as possible. They offer arrangements for some people to pay in instalments, but you generally need to ask before the deadline, not after. Check the options on gov.uk.
Frequently asked questions
Do I need to file a return if I made a loss?
You may still want to file, because declaring a loss can sometimes be set against other profits. Whether it is required depends on your circumstances, so check gov.uk or ask an accountant.
What if I started trading halfway through the tax year?
Your first return generally covers the portion of the tax year in which you traded. Your profit for that part-year is reported on the return, and you should still register on time.
Can I amend a return after sending it?
Often yes, within a time limit set by HMRC. Check the current rules on gov.uk and correct mistakes as soon as you spot them.