Filing your self-assessment tax return online as a sole trader can feel overwhelming, but with the right guidance, it becomes a manageable annual task. This comprehensive guide walks you through everything you need to know about completing your self-assessment for the 2024-25 tax year, ensuring you meet HMRC requirements whilst maximising your allowable expenses.

Understanding Self-Assessment for Sole Traders

Self-assessment is HMRC’s system for collecting Income Tax and National Insurance contributions from individuals who earn income that hasn’t been taxed at source. As a sole trader, you’re required to report your business income and expenses annually, allowing HMRC to calculate the correct amount of tax and National Insurance you owe.

Who Needs to File a Self-Assessment Return?

You must file a self-assessment tax return if you’re a sole trader with untaxed income over £1,000 in the tax year (6 April 2024 to 5 April 2025). This £1,000 threshold is known as the trading allowance, and if your income exceeds this amount, you’ll need to register for self-assessment and file annual returns.

Key Deadlines for the 2024-25 Tax Year

Meeting HMRC deadlines is crucial to avoid penalties and interest charges. Here are the essential dates to remember:

Registration Deadlines

• 5 October 2025: Deadline to register for self-assessment if you started trading in the 2024-25 tax year
• 5 October following the tax year: General registration deadline for new sole traders

Filing and Payment Deadlines

• 31 October 2025: Deadline for paper tax returns (though online filing is strongly recommended)
• 31 January 2026: Final deadline for online self-assessment submission and payment
• 31 July 2026: Second payment on account due (if applicable)

Missing these deadlines can result in automatic penalties starting at £100, with additional charges for extended delays.

Registering for Self-Assessment with HMRC

Before filing your first return, you must register with HMRC as a sole trader. This process establishes your tax obligations and provides you with a Unique Taxpayer Reference (UTR) number.

How to Register

You can register online through the HMRC website or by calling their helpline. You’ll need to provide:

• Your National Insurance number
• Personal details including full name and address
• Business information including trading name and start date
• Details about your business activities

After successful registration, HMRC will send you a UTR number and activation code, typically within 10 working days. Keep these details safe as you’ll need them for all future tax correspondence.

Gathering Your Financial Records

Accurate record-keeping forms the foundation of your self-assessment return. HMRC requires you to maintain detailed records of all business income and expenses for at least five years after the submission deadline.

Essential Records to Maintain

Income Records:

• Sales invoices and receipts
• Bank statements showing business income
• Cash sales records
• Records of goods or services provided for personal use

Expense Records:

• Purchase invoices and receipts
• Bank statements showing business expenses
• Mileage logs for business travel
• Records of business use for mixed-purpose items

Digital Record-Keeping

Consider using accounting software or apps to streamline your record-keeping. Many options integrate with your bank accounts and automatically categorise transactions, making self-assessment preparation significantly easier.

Understanding Allowable Business Expenses

Claiming legitimate business expenses reduces your taxable profit, potentially saving you significant amounts in tax and National Insurance contributions. However, expenses must be wholly and exclusively for business purposes.

Common Allowable Expenses

Office and Administrative Costs:

• Stationery, printing, and postage
• Telephone and internet bills (business portion)
• Professional subscriptions and trade publications
• Bank charges on business accounts

Travel and Transport:

• Business mileage at HMRC approved rates
• Public transport for business trips
• Hotel and meal costs during business travel
• Parking fees for business purposes

Equipment and Supplies:

• Business equipment under £1,000 (Annual Investment Allowance)
• Software subscriptions for business use
• Tools and equipment necessary for your trade
• Raw materials and stock

Home Office Expenses

If you work from home, you can claim a proportion of household expenses including:

• Gas and electricity bills
• Council tax
• Mortgage interest or rent
• Home insurance
• Repairs and maintenance

You can either calculate actual costs based on the proportion of your home used for business, or use HMRC’s simplified flat rate scheme.

Completing Your Self-Assessment Return

The online self-assessment form consists of several sections that capture your income, expenses, and personal circumstances. Here’s how to approach each section systematically.

Personal Information Section

Start by entering your personal details, ensuring all information matches HMRC records. This includes your name, address, and contact details. Any discrepancies can delay processing, so double-check everything carefully.

Business Income and Expenses

Turnover (Sales): Enter your total business income for the tax year, including:

• Sales of goods or services
• Any business grants received
• Income from sub-contracting work
• Value of goods taken for personal use

Total Business Expenses: Input your total allowable business expenses, organised by category. The online form provides specific boxes for different expense types, making categorisation straightforward.

Net Profit Calculation: The system automatically calculates your net profit by subtracting total expenses from total income. This figure determines your taxable business profit.

Capital Allowances

If you’ve purchased business equipment, you may be entitled to capital allowances. The Annual Investment Allowance (AIA) currently allows you to claim 100% of qualifying expenditure up to £1 million in the 2024-25 tax year.

Other Income Sources

Don’t forget to include any other income sources such as:

• Employment income from PAYE jobs
• Rental income from properties
• Investment income and dividends
• State benefits (if taxable)

Calculating Your Tax Liability

Once you’ve completed all relevant sections, HMRC’s system calculates your total tax liability. This includes Income Tax, National Insurance contributions, and potentially Student Loan repayments.

Income Tax Bands for 2024-25

• Personal Allowance: £12,570 (tax-free)
• Basic Rate: 20% on income between £12,571 and £50,270
• Higher Rate: 40% on income between £50,271 and £125,140
• Additional Rate: 45% on income over £125,140

National Insurance Contributions

As a sole trader, you’ll pay:

• Class 2 National Insurance: From April 2024, Class 2 NI is no longer mandatory. However, if your profits exceed £6,515, you’re treated as having paid Class 2 contributions for benefit entitlement purposes
• Class 4 National Insurance: 6% on profits between £12,570 and £50,270, then 2% on profits above £50,270

Making Your Tax Payment

HMRC offers several payment methods to settle your tax liability. Choose the option that best suits your cash flow and ensures payment arrives on time.

Payment Methods

Online Options:

• Direct debit (recommended for automatic payment)
• Debit or credit card through HMRC’s online service
• Online banking or telephone banking
• CHAPS same-day payment for urgent settlements

Traditional Methods:

• Bank transfer using your unique payment reference
• Cheque by post (allow extra time for processing)

Payment on Account System

If your tax liability exceeds £1,000, you may need to make payments on account for the following tax year. These advance payments are due on 31 January and 31 July, each representing half of the previous year’s liability.

Common Mistakes to Avoid

Learning from others’ experiences can help you avoid costly errors in your first self-assessment return.

Frequent Filing Errors

Mixing Personal and Business Expenses: Keep personal and business finances strictly separate. Only claim expenses that are wholly for business purposes.

Incorrect Mileage Claims: Use HMRC’s approved mileage rates and maintain accurate journey logs. The current rate is 45p per mile for the first 10,000 miles, then 25p per mile thereafter.

Missing Income: Include all business income, even small cash payments. HMRC can cross-reference various data sources to identify unreported income.

Claiming Disallowed Expenses: Avoid claiming personal expenses, fines, or costs that aren’t exclusively for business purposes.

Record-Keeping Oversights

Insufficient Documentation: Always obtain and retain receipts or invoices for claimed expenses. Bank statements alone may not provide sufficient evidence.

Poor Organisation: Implement a filing system from day one. Digital organisation with cloud backup ensures records remain accessible and secure.

Getting Professional Help

Whilst many sole traders successfully complete their own returns, professional assistance can be valuable, especially in complex situations.

When to Consider Professional Help

• Complex business structures or multiple income streams
• Significant capital transactions or investments
• Uncertainty about allowable expenses
• Time constraints or lack of confidence
• Previous HMRC investigations or disputes

Types of Professional Support

Qualified Accountants: Chartered or certified accountants provide comprehensive services including bookkeeping, tax planning, and HMRC representation.

Tax Advisers: Specialists in tax matters who can help optimise your tax position and ensure compliance.

Bookkeeping Services: Professional bookkeepers can maintain your records throughout the year, making self-assessment preparation much easier.

Planning for Next Year

Successful self-assessment isn’t just about filing your return – it’s about establishing systems that make future years easier and more efficient.

Ongoing Compliance

Monthly Record Reviews: Set aside time each month to organise receipts, reconcile bank statements, and update your records.

Quarterly Assessments: Review your financial position quarterly to estimate tax liabilities and set money aside for payments.

Annual Planning: Use your completed return to plan for the coming year, identifying opportunities for tax efficiency and business growth.

Tax-Saving Strategies

Pension Contributions: Personal pension contributions can reduce your taxable income whilst building retirement security.

Capital Expenditure Timing: Consider timing equipment purchases to maximise Annual Investment Allowance benefits.

Income Smoothing: Where possible, manage the timing of income to optimise your tax position across multiple years.

Conclusion

Filing your first self-assessment tax return as a sole trader represents an important milestone in your business journey. Whilst the process may seem daunting initially, understanding the requirements and maintaining good records throughout the year makes compliance manageable.

Remember that HMRC provides extensive guidance and support for new taxpayers. Their online resources, helplines, and webinars can provide additional assistance when needed. By following this guide and establishing good practices from the start, you’ll be well-equipped to handle your tax obligations efficiently whilst focusing on growing your business.

The key to successful self-assessment lies in preparation, organisation, and timely action. Start gathering your records early, understand your obligations, and don’t hesitate to seek professional advice when needed. With proper planning, your annual tax return becomes a routine administrative task rather than a source of stress.