The Complete Self Assessment Guide for Sole Traders (2025-26 Tax Year)

Self Assessment: Your Annual Obligation as a Sole Trader

If you're self-employed in the UK, you're required to file a Self Assessment tax return each year to report your income and pay the correct amount of Income Tax and National Insurance. For the 2025-26 tax year (6 April 2025 to 5 April 2026), here's everything you need to know.

Key Deadlines

Miss these dates and you'll face automatic penalties:

Pro tip: If you owe less than £3,000, you can choose to pay through your PAYE tax code - but only if you file by 30 December 2026.

What Forms Do Sole Traders Need?

As a sole trader, you'll typically complete:

• SA100 - the main tax return covering all income sources
• SA103 - the self-employment supplementary page where you report your trading income and expenses
• SA102 - if you also have employment income

TaxMTD generates your SA103 automatically from your categorised transactions, so you don't need to manually fill in boxes.

Allowable Expenses: What Can You Claim?

You can deduct allowable business expenses from your income to reduce your tax bill. Common categories include:

Office and Premises

• Rent, rates, and utilities for business premises
• Home office costs (simplified: £6/week or £26/month without receipts)
• Office supplies and stationery

Travel

• Business mileage (simplified rates: 45p/mile for the first 10,000 miles, 25p/mile thereafter)
• Public transport for business journeys
• Parking and congestion charges

Professional Costs

• Accountancy and legal fees
• Professional subscriptions and memberships
• Software and IT costs (including your TaxMTD subscription)

Stock and Materials

• Raw materials and goods for resale
• Packaging and postage

Marketing and Communication

• Website hosting and domain costs
• Advertising and business cards
• Phone bills (business proportion)

TaxMTD's AI categorisation automatically sorts your bank transactions into HMRC-compliant expense categories, so you don't miss any deductions.

Cash Basis vs Accruals

From 2024-25 onwards, the cash basis is the default for sole traders. This means:

• You report income when you receive payment
• You report expenses when you pay them
• No need to track debtors or creditors

This is simpler for most sole traders. If you want to use the accruals basis instead, you must actively elect to do so on your tax return. Read more about what changed with the cash basis.

Payments on Account

If your Self Assessment bill is over £1,000 (and less than 80% was collected at source via PAYE), HMRC will require payments on account - two advance payments towards next year's bill:

1. 31 January - first payment (50% of previous year's bill)
2. 31 July - second payment (50% of previous year's bill)

If your income drops significantly, you can apply to reduce your payments on account - but be careful, because HMRC charges interest if you reduce too far.

Penalties for Late Filing and Payment

HMRC's penalty system is strict:

• 1 day late: £100 fixed penalty
• 3 months late: £10/day for up to 90 days (max £900)
• 6 months late: £300 or 5% of tax due, whichever is greater
• 12 months late: £300 or 5% of tax due (in serious cases, up to 100% of tax due)

Late payment incurs interest from day one, plus 5% surcharges at 30 days, 6 months, and 12 months.

How TaxMTD Simplifies Self Assessment

TaxMTD is designed to make Self Assessment as painless as possible:

1. Bank feeds pull your transactions automatically from major UK banks
2. AI categorisation sorts expenses into HMRC categories
3. Mileage tracking records business journeys and calculates simplified rates
4. Receipt capture stores digital copies of receipts against transactions
5. SA103 generation calculates your trading profit and fills in the supplementary pages
6. MTD quarterly reporting - if your income is above £50,000, TaxMTD handles the new quarterly submissions too

Preparing for MTD

If your qualifying income is over £50,000, you'll need to use Making Tax Digital for Income Tax from April 2026. This means quarterly digital submissions instead of a single annual return. Getting your records digital now means a smooth transition.

Step-by-Step: Filing Your Return

1. Gather your records - bank statements, receipts, invoices, mileage logs
2. Categorise everything - or let TaxMTD do it automatically
3. Review your figures - check your income and expense totals match your records
4. Complete the return - SA100 + SA103 (plus any other supplementary pages)
5. Submit online - via HMRC's portal or directly through compatible software
6. Pay your bill - by 31 January to avoid interest and penalties

Get started with TaxMTD and take the pain out of Self Assessment.

Further reading: Cash Basis: What Changed for 2024-25 · MTD for Income Tax: What You Must Know · Compare TaxMTD vs other software