Thinking of Becoming Your Own Boss? Essential Memo for Sole Traders

Starting as a sole trader comes with several important dates that you need to keep in mind to stay compliant. Here's a quick summary:

Register with HMRC

You must register as a sole trader by 5 October following the end of your first tax year in business. For example, if you started trading on 1 June 2025, you'll need to register by 5 October 2026.

Tax Year

The UK tax year runs from 6 April to 5 April the following year. For example, the 2024/2025 tax year runs from 6 April 2024 to 5 April 2025.

Self Assessment Submission Deadline

• Paper Tax Return: If you prefer to file by paper, the deadline is 31 October following the end of the tax year. For the 2024/2025 tax year, this would be 31 October 2025.
• Online Tax Return: The deadline for online submissions is 31 January following the end of the tax year. So, for the 2024/2025 tax year, the online submission would be due by 31 January 2026.

Paying Tax

Tax payments are due in two parts, called payments on account. These are advance payments towards your next year's tax bill and are based on your previous year's tax liability. Payments are due on 31 January (for the first payment on account) and 31 July (for the second payment on account). For example, if your tax bill for the 2024/2025 tax year is due by 31 January 2026, you will need to make two payments on account towards the 2025/2026 tax year. Any remaining balance for the 2024/2025 tax year will be due by 31 January 2026.

Payments on account can be adjusted if your income drops significantly, but it's essential to stay on top of these deadlines to avoid penalties and interest on late payments.

Making Tax Digital (MTD) for Income Tax

From April 2026, sole traders with income over £50,000 will need to comply with MTD for Income Tax. This means they will no longer file their tax returns annually but will instead submit digital records and updates every quarter. The threshold will lower in subsequent years: £30,000 in April 2027 and £20,000 in April 2028. This shift towards digital filing will help improve efficiency and reduce errors, so it's a good idea to start using digital accounting tools now if your income is close to the threshold.

Record Keeping

You must keep your financial records for at least 5 years after the 31 January submission deadline. For the 2024/2025 tax year, that means keeping your records until at least 31 January 2031.

Staying on top of these dates is essential to ensure timely registration, accurate tax returns, and avoidance of penalties.