Your first self-employed tax return is less about forms than about timing. Three things catch most new sole traders out: registering before 5 October, understanding which tax year your first profits fall into, and the size of the first January bill. This guide walks through them in the order they happen.
1. Register and get your records started
If you earn more than £1,000 from self-employment in a tax year, gov.uk's set up as a sole trader page says you must register for Self Assessment. You register by registering for Self Assessment, and you need your National Insurance number. The deadline is 5 October after the tax year ends; for the 2025/26 tax year that was 5 October 2026. Our registration guide has the steps and the penalty risk. If your income is below the line, the trading allowance may mean you do not need to register at all.
Keep records from the first day you trade. gov.uk says sole traders must record business income and expenses for the return, and that if you do not prepare accounts you record them for each tax year, 6 April to 5 April. Pick a simple routine from day one: a separate business bank account, and every receipt filed monthly. See Self Assessment record keeping for how long to keep them.
2. Cash basis is the default
From the 2024/25 tax year, gov.uk says the cash basis is the default for sole traders: income is recorded when money is received, and costs when bills are paid. Traditional accounting records income when it is invoiced and costs when they are billed. You must opt out of the cash basis if you want traditional accounting. For most new traders the cash basis is the simpler place to start.
3. Which tax year do your first profits fall in?
Since 2024/25 profits are taxed by tax year: the profit arising between 6 April and 5 April. If your accounting year ends between 31 March and 5 April, you use those accounts as normal. Otherwise your profit is apportioned by days across the tax years.
HMRC's worked example is a good guide. A business starts on 1 October 2025 and prepares accounts for 1 October 2025 to 30 September 2026, showing £45,000 of profit. Apportioned by days, the taxable profit for 2025/26 (1 October 2025 to 5 April 2026) is £23,054; the remainder of that accounting period falls into 2026/27. HMRC accepts another reasonable method, such as months or weeks, if you apply it consistently.
Two practical consequences:
- If your accounting year ends on 31 March or 5 April, you avoid splitting profits between two sets of accounts. HMRC suggests this may make your return simpler.
- If you do not know the full-year profit when you file, you estimate it, enter provisional figures and amend later. Our guide to amending a return explains the 12-month window.
4. Expenses and allowances
You can deduct costs that are wholly and exclusively for the business. If your costs are small, the £1,000 trading allowance can be better than itemising. Working from home may also qualify for a flat-rate claim; see working from home expenses. Keep mileage logs if you use a vehicle for business.
5. The first January bill
The surprise is usually the payment. For your first year, the tax due by 31 January after the tax year includes:
- The full Self Assessment bill for the year, including Class 4 National Insurance, and
- Your first payment on account for the next year, which is half of that bill.
The second payment on account falls on 31 July. gov.uk confirms the pattern: where you did not make payments on account the year before, you pay the full tax bill plus your first payment on account.
Illustration: a first-year bill of £2,400 means £2,400 plus £1,200 = £3,600 on 31 January, then £1,200 on 31 July. Our payments on account guide explains the calculation and how to reduce the payments if your income falls. gov.uk also says you do not make payments on account if your previous bill was under £1,000 or you paid more than 80% of your tax elsewhere.
Set aside a share of every payment you receive into a separate savings pot rather than waiting to see the bill. Use the Self Assessment tax calculator to estimate the figure for your own profit.
6. A first-year timeline
| When | What to do |
|---|---|
| Day one of trading | Start records; check the £1,000 line |
| By 5 October after the tax year | Register for Self Assessment (if over £1,000) |
| After 5 April | Pull together income, costs and payments |
| By 31 October | Deadline if you file a paper return |
| By 31 January | File online, pay the balance and first payment on account |
| By 31 July | Second payment on account |
How ac-co helps
ac-co connects to your bank and books and drafts your SA103 and SA100 from them, so your first return starts from real transactions rather than a shoebox of receipts. You review the full computation and approve it before it is filed.