A sole trader’s guide to filing your first self-assessment tax return

What is a self-assessment tax return?

A self-assessment tax return is a form you must fill in to declare your income and expenses to HM Revenue and Customs (HMRC). The form calculates how much income tax and National Insurance you must pay. As a sole trader, you must complete a self-assessment tax return yearly if you earned more than £1,000 in the tax year (6 April to 5 April).

When is the deadline for filing your tax return?

The deadline for filing your tax return online is 31 January, following the end of the tax year. So, for example, if your tax year runs from 6 April 2022 to 5 April 2023, your tax return will be due on 31 January 2024.

If you miss the deadline, you'll face a penalty fee, which starts at £100 and increases the longer you leave it.

What do you need to include in your tax return?

Your tax return needs to include details of all the income you received during the tax year and any expenses you incurred that were related to your business.

Income can come from a variety of sources, including:

Sales of products or services
Interest on savings accounts
Rental incomee
Office rent or mortgage payments
Utility bills
Travel expenses
Marketing and advertising costs
Office equipment and suppliese
Professional fees, such as legal or accounting fees

It's essential to keep accurate records of all your income and expenses throughout the year to quickly fill in your tax return at the end of the year.

How to register for self-assessment?

Before filing your tax return, you must register for self-assessment with HMRC. You can do this online or by post.

To register online, you'll need to create a Government Gateway account. You can do this on the HMRC website by clicking the "Register for Self Assessment" link.

To register by post, you must fill in form CWF1 and send it to HMRC. You can find the form on the HMRC website.

Registering for self-assessment as soon as possible is essential to get your Unique Taxpayer Reference (UTR) number, which you'll need to fill in your tax return.

How to fill in your tax return?

Once you've registered for self-assessment and received your UTR number, you can start filling in your tax return.

Two ways to fill in your tax return are online or by post. Filing online is quicker and more accessible, and you'll get an instant acknowledgement that HMRC has received your tax return.

You'll need to use HMRC's online service to file your tax return online. You can access this by logging in to your Government Gateway account and clicking the "Self Assessment" link.

When you fill in your tax return, you must provide income and expense details. You'll also need to pay any tax you owe by the deadline.

If you're filing by post, you must download the relevant tax return form from the HMRC website and fill it in by hand. You'll then need to send the completed form to HMRC and any payments due.

Tips for filing your tax return

Filing your tax return can be a complicated process, but there are a few tips that can make it easier:

• Keep accurate records: As mentioned earlier, keeping accurate records of all your income and expenses is crucial. Keep receipts and invoices, and record them in a spreadsheet or accounting software.
• Understand what you can claim as expenses: You can claim expenses related to your business, but there are some restrictions. For example, you can't claim expenses for personal use or entertainment. Ensure you understand what you can and can't claim before filing your tax return.
• Don't leave it until the last minute: Filing your tax return can take longer than you think, especially if it's your first time. Don't leave it until the last minute to avoid any unnecessary stress.
• Seek professional help if needed: If you're not confident filling in your tax return, it's worth seeking professional help from an accountant or tax advisor. They can help you understand your tax obligations and ensure your tax return is filled in correctly.

What happens after you've filed your tax return?

Once you've filed your tax return, HMRC will calculate how much tax and National Insurance you owe based on your provided information. They'll then send you a statement showing how much you need to pay.

If you owe less than £3,000, you can pay your tax bill in one go or in instalments. If you owe more than £3,000, you must pay your tax bill in instalments.

You can pay your tax bill online or by post. HMRC accepts various payment methods, including credit or debit cards, bank transfers, or direct debit.