Self Assessment Tax for Sole Traders in the UK - Complete Guide

If you are self-employed in the UK, you pay your income tax through Self Assessment. You declare your income and expenses once a year, the system calculates what you owe, and you pay it directly to HMRC.

This guide covers exactly how it works - the deadlines, the tax rates, what you can claim, and how to file - written for sole trader tradesmen, not accountants.

Calculate your tax estimate now

Enter your annual profit after expenses to see your income tax, National Insurance, and take-home pay.

Who needs to do a Self Assessment?

You must register for Self Assessment and file a tax return if you are self-employed and earned more than £1,000 from self-employment in a tax year. The tax year runs from 6 April to 5 April.

If this is your first year trading, you need to register by 5 October in the second year of your trading (i.e. the year after you first started earning). Miss this deadline and HMRC can charge penalties.

The key deadlines

• 5 October - deadline to register for Self Assessment if you are new to self-employment
• 31 January - deadline to file your online return and pay your tax bill for the previous tax year
• 31 July - second Payment on Account deadline (see below)

Missing the 31 January deadline triggers an automatic £100 penalty, even if you owe no tax. Further penalties apply at 3, 6, and 12 months.

How much tax do sole traders pay in the UK?

Your tax is calculated on your net profit - that is, your income minus your allowable expenses. You are not taxed on your turnover.

Income tax rates (2025/26)

• Personal Allowance: £12,570 - you pay no income tax on the first £12,570 of profit
• Basic rate: 20% on profit between £12,571 and £50,270
• Higher rate: 40% on profit between £50,271 and £125,140
• Additional rate: 45% on profit above £125,140

Note: if your income exceeds £100,000, your Personal Allowance begins to taper by £1 for every £2 over £100,000.

National Insurance (2025/26)

From April 2024, Class 2 National Insurance was abolished. As a sole trader, you now pay:

• Class 4 NI: 6% on profits between £12,570 and £50,270
• Class 4 NI: 2% on profits above £50,270

Class 4 NI is calculated automatically as part of your Self Assessment return.

A worked example

A sole trader plumber with a net profit of £42,000 in 2025/26 would pay:

• Income tax: 20% on £29,430 (£42,000 - £12,570) = £5,886
• Class 4 NI: 6% on £29,430 = £1,766
• Total: approximately £7,652

This is why knowing your actual day rate matters. Use the day rate calculator to work backwards from your take-home target.

What can you claim as an allowable expense?

HMRC allows you to deduct expenses that are wholly and exclusively for business use. Common allowable expenses for tradesmen include:

• Tools, equipment, and materials used for work
• Van or vehicle costs - fuel, insurance, servicing, and repairs (work use proportion)
• Work clothing and PPE - protective gear, branded workwear (not ordinary clothes)
• Phone bill - the business proportion of your mobile
• Public liability insurance and trade insurance
• Accountant and professional fees
• Training and CPD directly related to your trade
• Advertising including website costs and directory listings
• Business use of home - a flat rate or calculated proportion
• Bank charges on a business account

You cannot claim: personal food and drink, fines, ordinary clothing, or personal purchases.

Capital purchases (van, major equipment) are handled differently - you claim them through the Annual Investment Allowance or capital allowances, not as a straightforward expense.

Payments on Account

If your tax bill is over £1,000, HMRC splits next year's expected tax into two advance payments called Payments on Account:

• First payment: 31 January (same day as your self assessment payment)
• Second payment: 31 July

Each payment is 50% of your previous year's tax bill. If your income drops, you can ask HMRC to reduce them - but penalties apply if you reduce them too much and underpay.

Many tradesmen are caught out by their first Payments on Account demand. In year one, they only expect to pay one year's tax. In practice, on 31 January they often owe 1.5 times that - the tax for the past year plus the first advance payment for the coming year.

How to register for Self Assessment

1. Go to gov.uk and search for "register for Self Assessment as self-employed"
2. You will need a Government Gateway account - create one if you do not have one
3. Select "I am self-employed" and complete the online registration
4. HMRC will send your Unique Taxpayer Reference (UTR) by post within 10 working days
5. Activate your Self Assessment account online using the code that arrives by post

Once registered, you will need to file a return every year even if you earn below the tax threshold or if your only source of income is self-employment.

How to file your Self Assessment return

1. Log into HMRC online services at gov.uk/self-assessment-tax-returns
2. Select "File your Self Assessment return"
3. Fill in the SA100 (main return) - this covers your personal details and total income
4. Fill in the SA103S or SA103F (self-employment supplementary pages) - income, expenses, and profit from your trade
5. The system calculates your tax and NI automatically
6. Review the figures, then submit
7. Pay your bill before 31 January by bank transfer, debit card, or HMRC Direct Debit

Making Tax Digital for Income Tax (MTD)

From April 2026, sole traders with income over £50,000 will be required to keep digital records and submit quarterly updates to HMRC instead of one annual return. From April 2027, this extends to those with income over £30,000.

If you fall into these thresholds, you will need compatible software. Self Assessment still applies - MTD changes the submission process, not the tax itself.

Frequently asked questions

How much tax does a sole trader pay in the UK?

A UK sole trader pays income tax on their net profit (income minus allowable expenses). The first £12,570 is tax-free (the Personal Allowance). Profit between £12,571 and £50,270 is taxed at 20%. Profit between £50,271 and £125,140 is taxed at 40%. Above £125,140 is 45%.

You also pay Class 4 National Insurance at 6% on profit between £12,570 and £50,270, and 2% above that. Class 2 NI was abolished from April 2024, so there is no flat weekly charge any more.

What is the Self Assessment deadline for sole traders?

The online filing deadline is 31 January following the end of the tax year. This is also the deadline to pay any tax owed. So for the 2025/26 tax year (6 April 2025 to 5 April 2026), you have until 31 January 2027 to file and pay.

If you are new to self-employment, register with HMRC by 5 October in your second year of trading or you risk a late registration penalty.

What expenses can a sole trader claim on Self Assessment?

Any expense that is wholly and exclusively for business. Common allowable expenses include: vehicle running costs (mileage rate or actual costs), tools and equipment, materials, business phone and internet, home office costs, professional insurance, trade training, and accountant fees.

If you use something for both business and personal purposes (a phone, a van, your home), you can claim a reasonable business proportion. The mileage rate method is the simplest way to handle vehicle costs.

Do I need an accountant to file Self Assessment?

Not legally, but many sole traders find it worth the cost - especially in the first year. A good accountant typically saves more in legitimate tax deductions than their fee costs. If your affairs are straightforward (one income source, clear expenses), filing yourself via HMRC online is manageable.

Can I claim for a van on finance?

Yes, but how depends on the finance type. Hire purchase: claim capital allowances on the van value. Lease: claim the monthly lease payments as an expense (adjusted for any private use). Always check with an accountant on your specific arrangement.

What records do I need to keep for HMRC?

HMRC requires you to keep records for at least 5 years after the 31 January filing deadline. Keep all invoices you raise, all receipts for expenses, and bank statements showing income and payments. For vehicle costs, keep a mileage log if using the mileage rate.

What happens if I cannot pay my tax bill on time?

Contact HMRC before the deadline, not after. HMRC has a Time to Pay arrangement that lets you spread payments over several months. Interest applies, but penalties are lower than if you do nothing and miss the payment.