Handling Self Assessment Tax When Temporarily Pausing Your Sole Trader Business

If you are a sole trader in the UK and decide to pause your business temporarily, you still need to understand how this affects your Self Assessment tax return obligations. Pausing your business does not automatically mean you stop filing tax returns or paying tax. Here is a practical explanation of what you should do.

Continuing to Submit a Self Assessment Tax Return

Even if your sole trader business is not currently trading, you may still need to complete a Self Assessment tax return for the tax year in question. HM Revenue and Customs (HMRC) requires you to report your income and expenses accurately for that period.

If you have no business income during the pause, you should still declare that fact on your tax return. This ensures HMRC has up-to-date information and helps avoid penalties for failing to file.

Registering or Informing HMRC About the Pause

If you have not previously registered for Self Assessment but start or pause your business, you must notify HMRC by 5 October following the end of the tax year in which you paused trading. For example, if you stop trading during the 2023-24 tax year (ending 5 April 2024), you should inform HMRC by 5 October 2024.

If you are already registered, you do not need to re-register but should still complete your tax return to show your trading status and income.

Keeping Records During the Pause

It is important to keep records of any transactions, even if minimal, during the pause. For example, if you incur expenses related to your business or receive any income, these should be recorded and reported.

Good record-keeping helps you complete your Self Assessment return accurately and supports your position if HMRC queries your tax affairs.

Examples

Example 1: You paused your sole trader business from January to March and had no income during that period. You still fill in your Self Assessment tax return for that year, showing zero business income but detailing any expenses or other income sources.
Example 2: You paused trading but received a small amount of business income, such as a late payment for work done before the pause. You must declare this income on your tax return.
Example 3: You closed your business permanently during the tax year. You should inform HMRC and complete your final tax return, showing the date trading ceased and all relevant income and expenses.

Paying Tax and Deadlines

Your tax liability depends on your total income, including any from your sole trader business, even if paused. You must pay any tax due by 31 January following the end of the tax year. Late filing or payment can result in penalties and interest.

Where to Confirm Details

For specific queries about your situation, including how to register, notify HMRC of a pause, or complete your return, consult the official guidance on the UK government website or contact HMRC directly. Official information ensures you follow the correct process for your circumstances.

Official reference: https://www.gov.uk/self-assessment-tax-returns. Always check the latest official guidance. Related forms: Browse our form category.

Important: This article provides general information. Government rules, forms and procedures can change, and this article may not reflect the latest updates. Check current GOV.UK guidance or the relevant authority before relying on it. ITG & Co. is independent and is not affiliated with a government department.