Managing Self Assessment When You Temporarily Stop Trading as a Sole Trader in the UK
If you are a sole trader and decide to temporarily stop trading, it is important to understand how this affects your Self Assessment tax return obligations with HM Revenue and Customs (HMRC).
Do You Still Need to Submit a Self Assessment Tax Return?
Even if you have temporarily ceased trading, you may still need to complete a Self Assessment tax return for the tax year that includes the period you were trading or stopped trading. HMRC requires you to report all income for the relevant tax year (which runs from 6 April to 5 April the following year), including any income from your sole trader business.
If you have no income from your business during the period you have stopped trading, you should still inform HMRC through your tax return. You can declare that you have ceased trading and report any other income you had in that tax year, such as employment earnings or savings interest.
How to Notify HMRC About Stopping Trading
- Tell HMRC you have stopped trading: You should inform HMRC as soon as possible, either by including this information on your Self Assessment tax return or by contacting them directly. This helps to avoid unnecessary reminders or penalties.
- Keep records: Even when not trading, keep your business records up to date until you formally close your business or resume trading. This includes any expenses or income related to the business before stopping.
When to Register or Deregister for Self Assessment
If you have previously registered for Self Assessment because of your sole trader status, you do not need to deregister immediately upon temporarily stopping trading. You remain registered until you notify HMRC that you have permanently ceased trading.
If you have never registered before but start trading again, you must register for Self Assessment by 5 October following the end of the tax year in which you started trading.
Example Scenario
Suppose you operated as a sole trader from April 2023 until December 2023, then stopped trading temporarily. For the tax year 2023 to 2024, you must complete a Self Assessment tax return reporting your income and expenses up to December 2023. On the return, you can state you stopped trading in December. If you have no other income, you still submit the return, showing your turnover and allowable expenses up to that date.
If you do not resume trading in the following tax year, you should notify HMRC that you have ceased trading permanently to avoid further Self Assessment obligations.
Keep in Mind
- Filing deadlines remain the same whether or not you are trading; missing deadlines can result in penalties and interest.
- Keep all relevant records, including bank statements and receipts, to complete your tax return accurately.
- If you are unsure whether you need to file or how to report your temporary stop, contact HMRC or consult official guidance.
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.