HMRC Self Assessment Guide for Sole Traders & Freelancers
If you are a UK sole trader or freelancer, Self Assessment is the system HMRC uses to collect Income Tax on your business profits. While it’s designed to be accessible, many new and established business owners still struggle with deadlines, expenses, penalties, and paperwork.
This guide breaks everything down in simple terms and provides a ready-to-use downloadable checklist to keep you compliant and organised throughout the tax year.
Who Needs to File a Self Assessment?
You must register with HMRC and file a Self Assessment tax return if:
You earn more than £1,000 from self-employment in a tax year.
You operate as a sole trader or freelancer, even part-time.
You receive untaxed income (rental income, dividends, foreign income, crypto gains).
You are a company director not paid exclusively via PAYE.
You need to claim tax reliefs or declare capital gains.
Anyone earning from gig work, consultancy, creative services, or online side hustles typically falls under this requirement.
Key Self Assessment Dates
| Task | Deadline |
|---|---|
| Register as self-employed | 5 October after the tax year ends |
| File paper return | 31 October |
| File online return | 31 January |
| Pay tax owed | 31 January |
| Second Payment on Account | 31 July |
How to File Your Self Assessment
To file your Self Assessment, register with HMRC to get your UTR, then keep organised records of income, expenses, receipts, bank statements, and mileage throughout the year.
When filing, gather your totals for income, expenses, pension contributions, employment income, and any rental income or capital gains. Complete the SA100 and SA103 forms online and submit your return by 31 January.
Finally, pay any tax owed, including Income Tax, Class 2 and Class 4 National Insurance, and Payments on Account if HMRC requires them.
Allowable Business Expenses (What You Can Claim)
You can lower your taxable profit by claiming genuine business expenses such as home office costs (a share of rent, bills, or HMRC’s flat rate), equipment and tools (laptops, software, subscriptions), travel and mileage (45p per mile, public transport, parking, work trips), marketing (website costs, ads, training), and professional services (accountant, legal fees, business insurance).
Home office
Equipment
Travel
Marketing
Professional services
Personal or non-business expenses cannot be claimed.
Payments on Account Explained
Payments on Account are advance payments towards next year’s tax bill.
You must pay them if:
Your tax bill is over £1,000, and
More than 80% of your income wasn’t taxed at source.
Payment Date Amount First Payment on Account 31 January 50% of next year’s bill Second Payment on Account 31 July 50% of next year’s bill
- If your income drops next year, you can apply to reduce these payments.
Penalties You Should Avoid
HMRC charges penalties for:
Late filing: £100 immediately, even if £0 tax is owed
Late payment: interest + penalties
Mistakes: depending on severity (careless → deliberate)
Avoiding deadlines is the easiest way to stay compliant.
When Should a Sole Trader Hire an Accountant?
Sole traders should consider using an accountant when their finances become more complex, such as when income grows, multiple income streams exist, expenses are difficult to calculate, or they want to legally reduce their tax bill; it is also worthwhile when they lack the time or confidence to file accurately or are thinking about switching to a limited company.
Growing income
Multiple income sources
Complicated expenses
Wanting tax efficiency
Limited time or confidence
Considering a limited company
Comparison: Filing Yourself vs Using an Accountant
| Factor | Do It Yourself | Use an Accountant |
|---|---|---|
| Cost | Free | £150–£400+ |
| Time needed | High | Low |
| Risk of errors | Moderate | Low |
| Tax efficiency | Basic | High |
| Support & advice | None | Professional guidance |
| Best for | Simple finances | Growing or complex businesses |
