Sole Trader Tax Return 2026: The Stress-Free Step-by-Step Guide

Tax Queen

Tax Expert @ Pie

6 min read

How to Do a Sole Trader Tax Return in 2026

To complete a sole trader tax return, you gather your income and expense records for the tax year, work out your taxable profit, enter it on the self-employment pages of your Self Assessment return, then check the calculation and pay what you owe. For the 2025-26 tax year, the online return is due by 31 January 2027, and so is any tax you owe. The rest of this article walks through each of those four steps in order.

If you have not registered yet or want a refresher on the key dates, our guide to registering and meeting Self Assessment deadlines covers the basics. Here, the focus stays firmly on the return itself.

Step One: Gather Your Records for the Right Tax Year

A UK tax year runs from 6 April to 5 April. The return most sole traders complete during 2026 covers the 2025-26 tax year, which ran from 6 April 2025 to 5 April 2026. You can file it online from 6 April 2026, and filing early does not mean paying early: the tax is still due on 31 January 2027. Filing early simply gives you more time to plan for the bill.

Before you open the return, pull together everything that shows money coming in and going out of your business. That usually means invoices or sales records, bank statements for any account you use for work, receipts for business costs, and a note of business mileage if you drive for work. If you are completing a tax return for sole trader income for the very first time, our article on your first HMRC tax return as a sole trader explains what to expect from the process.

It also helps to have your Unique Taxpayer Reference (UTR), the 10-digit number HMRC gave you when you registered, and your Government Gateway login to hand. Gather details of any other income too, such as wages from a job, savings interest or rental income, because one return covers everything you earned in the year.

Step Two: Work Out Your Taxable Profit

Your taxable profit is your business income minus your allowable expenses, meaning costs incurred wholly and exclusively for your business. Typical examples include equipment, stock, software, the work share of phone and internet bills, business insurance, and travel to meet clients. Everyday costs with a personal element, such as ordinary clothing or commuting to a regular workplace, are generally not allowed. Our guide to essential expenses for self-employed sole traders goes through what you can and cannot claim.

Cash Basis or Traditional Accounting

Since the 2024-25 tax year, the cash basis has been the default for sole traders. It means you record income when you receive it and expenses when you pay them, which suits most small businesses. Traditional accounting (also called accruals) records income and costs when they are earned or incurred, even if no money has changed hands yet. You can opt out of the cash basis if traditional accounting fits your business better.

If you use your own car for work, you can claim simplified mileage instead of working out actual running costs: 45p a mile for the first 10,000 miles in the tax year and 25p a mile after that.

Using the Trading Allowance Instead of Expenses

The trading allowance lets you earn up to £1,000 of self-employed income a year tax-free. If your income is above that, you can deduct the £1,000 allowance instead of your actual expenses. This only makes sense when your real costs are lower than £1,000, and you cannot claim both in the same year.

Step Three: Complete the Self-Employment Pages

When you file online, HMRC asks a series of questions about your income and then shows you the right self-employment section. On paper, these are supplementary pages: SA103S, the short version, if your turnover was under £90,000 and your affairs are straightforward, or SA103F, the full version, if your turnover was higher or your situation is more complex. Paper returns have an earlier deadline of 31 October 2026 for the 2025-26 tax year.

In this section you enter your business details, your turnover, your total allowable expenses (or the trading allowance), and any capital allowances, which are tax relief on equipment and other items you buy to keep using in the business. If your accounting period does not end on 31 March or 5 April, you will need to apportion your profits to match the tax year, because self-employed profits are now taxed on a tax-year basis.

Take care with the figures. Many errors on a sole trader tax return come from simple typos, missing income or expenses entered twice. Keeping your income and costs sorted throughout the year makes this step far quicker, and it is one reason some sole traders use software for it. You can see how the Pie Tax approach works to get a feel for what that looks like.

Step Four: Check Your Bill and Pay on Time

Once your figures are in, HMRC calculates what you owe. For sole traders in England, Wales and Northern Ireland in 2025-26, Income Tax is charged at 20% on profits above the £12,570 Personal Allowance (the amount you can earn tax-free), rising to 40% and then 45% at higher levels. Scotland has its own Income Tax bands. You also pay Class 4 National Insurance, the National Insurance charged on self-employed profits, at 6% on profits between £12,570 and £50,270, and 2% above that. For a fuller breakdown, see our guide to the sole trader tax rate.

Read the calculation carefully before you submit. If anything looks wrong, go back and check rather than filing and fixing it later, although you can amend an online return within 12 months of the filing deadline if you spot a mistake afterwards.

Payments on Account

If your bill is over £1,000, HMRC usually asks for payments on account: two advance payments towards next year's tax, each half of this year's bill, due on 31 January and 31 July. Any tax still owed is then settled through a balancing payment the following 31 January. Our article on balancing payments for sole traders explains how this works in practice. Missing the filing deadline brings an automatic £100 penalty, even if you owe no tax.

Where Making Tax Digital Fits Into Your Return

Making Tax Digital for Income Tax has applied since 6 April 2026 to sole traders and landlords with qualifying income over £50,000, and the threshold falls to £30,000 from April 2027. If it applies to you, you keep digital records and send quarterly updates to HMRC during the year, then confirm your final figures after the year ends, using Making Tax Digital software that works with HMRC's systems.

For the 2025-26 tax year, the usual Self Assessment process still applies, because that year ended before Making Tax Digital took effect. Even so, the habits it encourages, such as keeping records up to date every month rather than in a rush each January, make any return easier to complete.

What to Do Now

Start by confirming which tax year you are filing for and gathering your records in one place, then work through the steps above in order: profit first, self-employment pages next, calculation last. Give yourself a few weeks before 31 January 2027 so you have time to track down missing receipts or ask HMRC a question.

If you would rather have your income pulled in and your allowable expenses sorted as you go, Pie Tax is self-assessment software for sole traders, landlords and freelancers that handles both Self Assessment and Making Tax Digital, so your return feels far less daunting. You can read about why sole traders choose it, and when you feel ready, sign in or try it for free and make a start on your 2025-26 return today.