Tax Basics for Sole Traders
Understanding self-assessment, tax payments, and allowable expenses.
Tax Basics for Sole Traders
Understanding your tax obligations helps you stay compliant and avoid surprises. This module covers the essentials of self-assessment tax.
What Taxes You Pay
Income Tax
On your business profits (income minus allowable expenses).
National Insurance
Class 2 (flat rate) and Class 4 (on profits above threshold).
The Self-Assessment Timeline
- 5 April - Tax year ends
- 31 October - Paper return deadline
- 31 January - Online return deadline and payment due
- 31 July - Second payment on account due
Payments on Account
If your tax bill is over GBP1,000, you'll make payments on account - advance payments based on last year's bill.
Warning: Your first year can be a shock - you may owe 150% of your normal bill (last year's tax plus two payments on account).
Allowable Expenses
Deduct legitimate business expenses:
- Office costs and equipment
- Travel and subsistence
- Professional services
- Marketing and advertising
- Insurance
- Training (if relevant to your business)
Record Keeping
You must keep records for 6 years:
- All income received
- All business expenses
- Bank statements
- Receipts and invoices
Tip: Digital accounting software makes this much easier and helps prepare your tax return.
When to Get Help
Consider an accountant if:
- Your accounts are complex
- You're VAT registered
- You have multiple income sources
- You're not confident with numbers