Self Assessment Tax Payments for Sole Traders: How and When to Pay HMRC
If you are a sole trader in the UK, you usually need to complete a Self Assessment tax return to report your business income and pay any tax due. Unlike employees whose tax is deducted automatically through PAYE, sole traders must manage their own tax payments through the Self Assessment system operated by HM Revenue and Customs (HMRC).
When to Register and File Your Return
You must register for Self Assessment if you have not done so before and HMRC requires you to complete a tax return. Typically, you need to notify HMRC by 5 October following the end of the tax year (which runs from 6 April to 5 April) if you started trading in that tax year or if you have not submitted a return previously but now need to.
For example, if you began trading in June 2023, you should register for Self Assessment by 5 October 2024. Failure to notify HMRC by this deadline can result in fines.
The deadline for submitting your tax return online is 31 January following the end of the tax year. For instance, the return for the tax year ending 5 April 2024 must be filed by 31 January 2025.
How to Pay Your Tax
Once you submit your Self Assessment tax return, HMRC will calculate the amount of Income Tax you owe based on the income you report. This includes your profits from self-employment and any other taxable income.
You must pay the full amount due by 31 January following the tax year. Continuing the example above, any tax owed for the 2023-24 tax year must be paid by 31 January 2025.
Payments on Account
If your Self Assessment tax bill (excluding Capital Gains Tax and student loan repayments) is more than £1,000 and less than 80% of your tax has been collected at source (for example, through PAYE), you will usually need to make advance payments towards your next year’s tax. These are called payments on account and are due in two instalments: 31 January and 31 July after the end of the tax year.
If you are required to make payments on account, HMRC will inform you. These payments are based on your previous year’s tax bill, so if your income fluctuates, you can ask HMRC to reduce them.
Keeping Records
It is important to keep accurate records of your income and expenses throughout the year. This includes invoices, receipts, bank statements, and any other documents that support the figures you report on your tax return. Good record-keeping helps you complete your return correctly and can be essential if HMRC asks for evidence.
Penalties and Interest
If you do not file your tax return or pay your tax on time, HMRC may charge interest on the amount owed and apply penalties. The earlier you file and pay, the better to avoid extra costs.
Summary
- Register for Self Assessment by 5 October after you start trading if you need to file a return.
- File your tax return online by 31 January following the end of the tax year.
- Pay the tax you owe by the same 31 January deadline.
- Make payments on account if HMRC requires them, usually by 31 January and 31 July.
- Keep thorough records to support your return.
- Contact HMRC if your circumstances change or if you need to adjust payments on account.
This guidance applies to sole traders in the UK. For detailed, personalised advice or complex situations, consult HMRC’s official Self Assessment resources or speak to a tax professional.
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.