What is Self Assessment?
Self Assessment is HMRC's system for collecting income tax from people whose tax is not deducted at source through PAYE. If you are a sole trader, you must file a Self Assessment tax return every year to tell HMRC how much you earned and pay the tax you owe.
The tax year runs from 6 April to 5 April. Your Self Assessment return covers your income and expenses for this period.
Do You Need to File Self Assessment?
You must register for and file Self Assessment if:
- You were self-employed as a sole trader and earned more than £1,000
- You are a partner in a business partnership
- You are a director of a limited company (usually)
- You had untaxed income (e.g., rental income, investment income)
- Your annual income was over £100,000
- You need to claim certain tax reliefs or report capital gains
Register with HMRC as soon as you start self-employment at gov.uk/register-for-self-assessment.
Key Dates and Deadlines
| Deadline | What's Due |
|---|---|
| 5 October | Deadline to register for Self Assessment for the previous tax year |
| 31 October | Deadline for paper tax return (most people file online now) |
| 31 January | Deadline for online tax return AND payment of tax owed |
| 31 July | Deadline for second payment on account |
Missing the 31 January deadline results in an automatic £100 penalty, even if no tax is owed.
What to Include in Your Return
Business Income
Report all income from your self-employment — this includes cash payments, bank transfers, and income paid through third parties. If you use CIS, the gross amounts on your invoices are your income (not the net amounts after CIS deductions).
Business Expenses
You can deduct allowable business expenses from your income to reduce your tax bill. Common deductible expenses for sole traders:
- Materials and subcontractor costs — directly related to jobs
- Tools and equipment — purchase or hire
- Vehicle costs — business mileage (45p per mile for first 10,000 miles, 25p thereafter) or actual costs
- Phone and internet — the business proportion
- Protective clothing — work-specific items (not regular clothing)
- Training — courses that develop existing skills (not new skills)
- Professional fees — accountant, solicitor
- Insurance — public liability, tools
- Marketing and advertising
You cannot deduct:
- Personal expenses
- Fines and penalties
- Non-work clothing
- Food and drink (except in exceptional circumstances)
CIS Deductions Suffered
If you received CIS-deducted payments, enter the total of all CIS deductions on your return. These are credited against your tax bill. Keep all Payment and Deduction Statements from contractors as evidence.
Capital Allowances
If you purchased equipment, vehicles, or tools for your business, you may be able to claim capital allowances — potentially deducting the full cost in the year of purchase through the Annual Investment Allowance (up to £1 million per year).
How Much Tax Will You Pay?
Sole traders pay:
- Income Tax on taxable profits (after the personal allowance of £12,570)
- Basic rate: 20% (£12,571–£50,270)
- Higher rate: 40% (£50,271–£125,140)
- Additional rate: 45% (above £125,140)
- Class 2 National Insurance — currently included within the income tax calculation via Self Assessment
- Class 4 National Insurance — 6% on profits between £12,570 and £50,270; 2% above £50,270
Example calculation (£30,000 profit, 2025-26 rates):
- Personal allowance: £12,570
- Taxable income: £17,430
- Income tax (20%): £3,486
- NI (9% on £17,430): £1,569 (simplified)
- Total tax: ~£5,055
Payments on Account
HMRC requires most taxpayers to make payments on account — advance payments toward next year's tax bill, spread across two instalments:
- 31 January: first payment on account (50% of previous year's tax bill)
- 31 July: second payment on account (another 50%)
When you file your first Self Assessment return, you may face a larger payment than expected because it includes the first payment on account alongside the tax for the year just filed.
How to File Your Return
File online at self-assessment.service.hmrc.gov.uk. You'll need your Government Gateway login. The process takes 30–90 minutes for a straightforward sole trader return.
HMRC's online system guides you through each section. Have the following to hand:
- All income received (your invoice records)
- All business expenses (receipts or records)
- Any CIS Payment and Deduction Statements
- P60s or P45s if you also had employment income
Getting Your CIS Refund
If contractors deducted CIS from your payments throughout the year, HMRC will refund any excess once you file your return. The refund is usually processed within 2–4 weeks of filing online.
Many subcontractors are owed hundreds or thousands of pounds in CIS refunds annually. File your return as soon as the tax year ends (after 6 April) to get your refund sooner.
Working with an Accountant
For straightforward sole trader returns, many people file themselves. However, an accountant can identify allowable expenses you might have missed and help with more complex situations (CIS, VAT, multiple income sources). A good accountant typically pays for themselves in tax savings.
FlashBill and Self Assessment
FlashBill keeps a complete record of all your invoices and payments throughout the year. At year-end, you can export your income records for use in your Self Assessment return or pass them to your accountant. CIS invoices clearly show the deductions suffered, saving time at tax time.