If you have started working for yourself, your first self assessment tax return can feel like the scariest admin task. HMRC uses self assessment to collect income tax and National Insurance from people who do not pay tax through PAYE. As a sole trader, you must report your business profits each year. The good news is that the process is far more straightforward than it looks once you understand the steps. This guide covers the 2025/26 tax year rules and shows you how to file with confidence.
Who Must File a Self Assessment Tax Return and When to Register
You must register with HMRC for self assessment if your turnover exceeds the £1,000 trading allowance in a tax year. The trading allowance has stayed at £1,000 since its introduction in April 2017 (HMRC, 2025). If your income from self-employment is below that figure, you do not usually need to register or file a return. You may still choose to register voluntarily if you want to record a loss or claim certain benefits. You may also register to build a record with HMRC.
The registration deadline is strict. You must tell HMRC by 5 October in your business’s second tax year. The UK tax year runs from 6 April to 5 April the following year. Imagine you started trading in June 2025. The 2025/26 tax year is your first year of trading. You must register by 5 October 2026. You can register online through GOV.UK. HMRC will send you a Unique Taxpayer Reference, or UTR, within ten working days. You need this UTR to create or access your Government Gateway personal tax account.
Once registered, you must send a self assessment return each year unless HMRC agrees you no longer need to file. Even if you made a loss, you still submit the return to declare that fact. Missing the 5 October registration deadline can lead to penalties. Add the date to your calendar as soon as you invoice your first client.
The Records and Figures You Need Before You Start
Good record-keeping makes your self assessment return much faster and far less stressful. You should gather your business bank statements, sales invoices, purchase receipts, and any records of business mileage. HMRC can ask to see your records for up to five years after the relevant 31 January deadline (HMRC, 2025). Keep everything organised from day one. A simple spreadsheet or bookkeeping app will usually be enough for a new sole trader.
You will also need your National Insurance number, your UTR, your Government Gateway login details, and details of any other income. That includes employment income if you also have a PAYE job, dividends, rental income, pension contributions, and interest from savings. If you work from home, separate your personal and business costs clearly. Choosing the right business structure from the start also matters. Compare your options on our sole trader or limited company page.
How to Fill In Your Self Assessment Return Online
The online self assessment return uses form SA100. If you are a sole trader, you also complete the self-employment pages. Use form SA103S for simpler affairs or SA103F for more complex businesses. HMRC’s online service will guide you through each section, and you can save your progress and return later. You do not have to complete it in one sitting.
Start by entering your total turnover, which is all the money your business received before any expenses. Next, enter your allowable business expenses. These reduce your taxable profit. Common examples include office supplies, travel costs, professional subscriptions, marketing spend, and a portion of your home-working costs. Our guide to home-working expenses for self-employed people explains how to calculate the business part of your household bills.
You then choose between deducting your actual expenses or claiming the £1,000 trading allowance. You cannot do both. For many new sole traders with low expenses, the trading allowance is simpler. If your actual expenses are higher than £1,000, claiming them will reduce your tax bill further. Once you have entered all the figures, the system will calculate your tax and National Insurance automatically. Check every figure before you submit, because errors can delay refunds or trigger HMRC enquiries. Submitting your self assessment return well before the deadline also gives you more time to save for the bill.
What You Owe: Tax, National Insurance and Payment Deadlines
For the 2025/26 tax year, you can earn up to £12,570 before paying income tax, thanks to the personal allowance. This allowance stays at that level until April 2028 (HMRC, 2024). Taxable profits above the personal allowance fall into income tax bands. You pay 20% on taxable profits from £12,571 to £50,270. You pay 40% on profits from £50,271 to £125,140, and 45% on profits above that.
National Insurance for sole traders works differently from employees. Compulsory Class 2 National Insurance contributions were due to end in April 2024, but the government retained them from April 2025. For the 2025/26 tax year, Class 2 NICs are £3.50 per week. This applies if your profits are above the small profits threshold of £6,845. You can still pay Class 2 voluntarily if your profits are below that threshold. This helps protect your State Pension record (HMRC, 2025).
For the 2025/26 tax year, you pay Class 4 National Insurance at 9% on profits between £12,570 and £62,430. You pay 2% on profits above £62,430 (HMRC, 2025).
The deadline for filing your online self assessment return is 31 January following the end of the tax year. For the 2025/26 tax year, the deadline is 31 January 2027. The same date is the deadline for paying any tax you owe. If your bill is over £1,000 and less than 80% of your tax is collected at source, HMRC will usually ask for payments on account. These are advance payments towards next year’s bill, split into two instalments: the first by 31 January and the second by 31 July. Each instalment is roughly half of your previous year’s tax bill. This catches many first-time sole traders out, because your first January bill can include both the balancing payment for the year just ended and your first payment on account. Set aside roughly 25% to 30% of your profits throughout the year to stay ahead of it.
Penalties and Common First-Timer Errors to Avoid
Missing the 31 January deadline triggers an automatic £100 penalty, even if you owe no tax. After three months, HMRC can add daily penalties of £10 per day for up to 90 days. At six months and 12 months late, further penalties apply. These are 5% of the tax due, subject to a £300 minimum. The simplest way to avoid these charges is to file your self assessment return before Christmas. Then you can leave the festive period free (HMRC, 2025).
New sole traders often make the same mistakes. They mix personal and business spending on one bank card, lose receipts, or forget to register by the 5 October deadline. Some also fail to save enough for their January bill. Another common error is selecting the wrong self-employment form in the online system. If your turnover is below £85,000 you can usually use the short SA103S form, which is much quicker than the full form.
Finally, do not panic if you cannot pay your bill in full. HMRC may let you set up a Time to Pay arrangement, but you must contact them before the deadline. Ignoring the demand will always make the problem more expensive. If your situation changes, for example you return to PAYE employment, tell HMRC promptly. They can then update your filing requirements.
Your first self assessment tax return is a milestone, not a mystery. Getting it right from the start gives you control over your cash flow and protects you from penalties. If your business is growing, it may also be time to review your structure. Our sole trader or limited company comparison explains the tax and liability differences. For context on the trends shaping women-led businesses in the UK, see our key facts page.
