Self-employed? Keep more of what you earn.

Tax for sole traders, in plain English

As a sole trader you pay Income Tax and National Insurance on your profit — your income minus allowable business expenses. There's no employer taking tax off as you go, so you file a self assessment return each year and pay what you owe by 31 January.

That's simple enough on paper. In practice, the difference between a good return and a rushed one is usually the expenses: what you can claim, how much, and whether your records back it up.

Claiming expenses properly

Allowable expenses are costs you have wholly and exclusively for your business. Some are obvious — materials, stock, tools. Others are easy to miss: a share of your phone bill, business mileage, protective clothing, professional subscriptions, a proportion of your home costs if you work from home.

Vehicles are a good example. You can use simplified mileage rates or claim actual costs plus capital allowances. The right choice depends on the vehicle and how much you drive, and once you choose for a vehicle you generally stick with it. We'll work out which suits you.

National Insurance

Self-employed people pay Class 4 National Insurance on profits above a threshold. Most no longer have to pay Class 2, but you can choose to pay it voluntarily to keep building your State Pension record if your profits are low. We'll check your record and tell you if voluntary contributions are worth it.

Payments on account

After your first year, HMRC will usually ask for advance payments towards next year's tax — in January and July. The first year can be a shock because you're paying a full year's bill and half of next year's at the same time. We plan for this with you, and apply to reduce the payments if your income is falling.

Getting ready for Making Tax Digital

If your turnover from self-employment and property is above the MTD threshold, you'll need to keep digital records and send quarterly updates. We'll set you up with software now so the switch is painless — and if you're under the threshold, we'll keep your records MTD-ready anyway.