What is Self Assessment?
Self Assessment is HMRC's system for people who need to report income and calculate tax that has not been fully dealt with automatically through systems such as PAYE.
For many sole traders, the annual Self Assessment return is where business income and allowable business expenses are reported so the taxable profit can be calculated.
Being self-employed does not mean HMRC simply taxes all money received. The return reports the relevant business figures and allowable deductions so your taxable self-employed profit can be established.
Who needs to send a Self Assessment tax return?
HMRC says you must normally send a tax return if, during the relevant tax year, you were self-employed as a sole trader and earned more than £1,000 before deducting expenses.
You must also normally send a return if you were a partner in a business partnership.
Self Assessment can also be required for reasons unrelated to self-employment, including certain:
- Property income.
- Foreign income.
- Savings or investment income.
- Capital gains.
- High Income Child Benefit Charge liabilities.
- Other untaxed income.
Someone can be employed and self-employed at the same time. PAYE income and tax already deducted can be included alongside the relevant self-employed figures.
How does the £1,000 self-employed threshold work?
HMRC's sole-trader test is based on gross trading income before taking off expenses or other tax relief.
£6,000 income and £2,000 of business expenses
Your gross trading income is £6,000. The fact that expenses reduce the eventual business profit to £4,000 does not make your gross income less than the £1,000 Self Assessment test.
The separate trading allowance rules can affect how small amounts of qualifying trading income are treated, so the £1,000 figure should not simply be interpreted as a £1,000 taxable-profit threshold.
How do you register for Self Assessment?
If you need to complete a return and have not previously been required to do so, you generally need to tell HMRC.
HMRC's standard deadline for telling them is 5 October following the end of the relevant tax year.
Check whether you need a return
Establish whether your self-employment or other income creates a Self Assessment requirement.
Register or reactivate
Use HMRC's registration process if you are new to Self Assessment or need to reactivate an existing account.
Keep your HMRC details
Retain your Unique Taxpayer Reference and the information needed to access HMRC's online services.
Prepare your business figures
Organise income, expenses and other relevant tax information before completing the return.
What is a UTR number?
A Unique Taxpayer Reference, commonly called a UTR, is the identifying reference HMRC uses for your Self Assessment tax affairs.
Keep it securely because it is commonly needed when dealing with HMRC, filing returns and making Self Assessment payments.
What information goes on a self-employed tax return?
The exact sections depend on your circumstances, but the self-employment part typically needs information about the business and its financial results.
Business income
Sales, fees, takings and other relevant receipts from your trade.
Business expenses
Qualifying costs that can be deducted when calculating taxable business profit.
Other income
Employment, property, investment or other taxable income may also need to be reported where relevant.
Tax already paid
Relevant tax already deducted can affect the final amount payable or repayable.
How do allowable expenses affect Self Assessment?
Allowable business expenses normally reduce the profit on which your self-employed tax is calculated.
| Example | Amount |
|---|---|
| Business income | £40,000 |
| Allowable expenses | £10,000 |
| Business profit | £30,000 |
This is why accurate expense records matter. Personal costs are not deductible merely because they were paid from a business account.
Read our Self-Employed Allowable Expenses Guide for the main expense rules.
What are the main Self Assessment deadlines?
Under HMRC's standard annual timetable, the key dates are:
| Deadline | What it normally relates to |
|---|---|
| 5 October | Telling HMRC you need Self Assessment where you are newly required to file or need to reactivate. |
| 31 October | Standard deadline for HMRC to receive a paper tax return. |
| 31 January | Standard online filing deadline and payment deadline for the balancing amount due. |
| 31 July | Second payment on account where payments on account apply. |
Submitting the return does not itself pay the tax bill. Make sure any amount due to HMRC is also paid by the applicable payment deadline.
What can be included in a Self Assessment tax bill?
The amount payable depends on your circumstances and can include more than simply Income Tax on your self-employed profit.
Depending on the return, the calculation can include relevant:
- Income Tax.
- Class 4 National Insurance for the self-employed.
- Capital Gains Tax amounts dealt with through Self Assessment.
- Student or postgraduate loan repayments.
- Other charges collected through the return.
- Payments on account towards the following year's bill.
What are payments on account?
Payments on account are advance payments towards your next Self Assessment bill.
HMRC normally divides them into two instalments:
- First payment on account — due 31 January.
- Second payment on account — due 31 July.
Each instalment is normally half of the relevant tax amount from the previous year.
Your first January payment can be larger than the tax bill you expected
If payments on account apply and you have not made any already, January can include both the full amount due for the completed year and the first payment on account towards the following year's bill.
When are payments on account not normally required?
HMRC says you generally do not need the two payments on account where either:
- The relevant tax owed for the previous year was less than £1,000.
- More than 80% of the tax was already collected outside Self Assessment.
What if your income falls?
If you reasonably expect your tax bill to be lower, HMRC allows you to apply to reduce payments on account.
If payments are reduced too far and more tax ultimately becomes due, interest can apply to the shortfall.
What should you prepare for your first Self Assessment?
A simple preparation checklist is:
Total your business income
Reconcile invoices, sales records and other trading receipts.
Review allowable expenses
Identify qualifying costs and remove personal expenditure.
Gather other tax information
Include relevant employment, property, investment or other income information where applicable.
Budget for the payment
Consider both the balancing tax bill and whether payments on account will also become due.
What records should self-employed taxpayers keep?
You need records that support the figures entered on the return.
These commonly include:
- Sales invoices and income records.
- Purchase invoices and receipts.
- Bank statements.
- Business mileage records.
- Evidence supporting mixed-use expense calculations.
- Details of equipment or capital purchases.
- Other documents needed to explain the tax return figures.
See our Self-Employed Record Keeping Guide for the full record-retention rules.
What if you make a mistake on your tax return?
Discovering an error does not mean it should be ignored.
HMRC provides procedures for amending Self Assessment returns. The method and time available depend on when the original return was submitted and the tax year concerned.
If an error affects the tax payable or refund due, dealing with it promptly can help prevent the position becoming harder to resolve later.
What happens if Self Assessment is late?
HMRC can charge penalties for filing a return late, and separate consequences can apply where tax is paid late.
Late-payment interest can also apply to outstanding tax.
No tax to pay does not necessarily mean no late-filing penalty
If HMRC requires a tax return, the filing obligation still exists. A return that is required but submitted late can attract a filing penalty even where the eventual tax bill is nil.
Reviewed & Updated
18 August 2026
2026/27
GO TAX REFUNDS
HM Revenue & Customs / GOV.UK
Whether you need Self Assessment and how much tax is payable depends on your total income, expenses, allowances, other tax already paid and individual circumstances. Deadlines and HMRC procedures should always be checked for the return being filed.
Self-Employed Self Assessment FAQs
Do all self-employed people need Self Assessment?
Not automatically. HMRC normally requires a sole trader to send a return where gross trading income is more than £1,000 before expenses. Other circumstances can also create a filing requirement.
Is the £1,000 threshold based on profit?
No. HMRC's sole-trader filing test refers to gross trading income before taking off allowable expenses or other tax relief.
When do I need to register for Self Assessment?
Under HMRC's standard timetable, someone newly required to complete a return should normally tell HMRC by 5 October following the end of the relevant tax year.
When is an online Self Assessment return due?
The standard online filing deadline is 31 January following the end of the tax year. The tax due is also normally payable by that date.
What are payments on account?
They are advance payments towards the following Self Assessment bill. Where required, they are normally paid in two instalments on 31 January and 31 July.
Why is my first January tax payment so high?
If payments on account apply, the January amount can include the tax due for the completed year plus the first advance payment towards the following year's bill.
Can I claim business expenses on Self Assessment?
Qualifying allowable business expenses can normally reduce your taxable self-employed profit. Private expenses cannot simply be deducted.
Can I be employed and self-employed?
Yes. PAYE employment and self-employment can exist at the same time. Relevant employment income and tax deducted can be included as part of your overall Self Assessment position.
HMRC & GOV.UK Sources
This guide is reviewed against current HMRC guidance covering Self Assessment registration, filing, payments and tax bills.
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