Self Assessment 2026: How Sole Traders Can Prepare Early

Does January usually mean a last-minute scramble for receipts, bank statements, and your HMRC login? Well, guess what, we’re here to tell you some good news: this year can be different. The deadline for the 2025/26 tax return is 31 January 2027, and with the help of this blog and a little preparation, you could save stress, penalties, and possibly money. 

Here’s another reason to keep reading: this year brings a big change. Making Tax Digital for Income Tax is now live for some sole traders, and more will join from April 2027. We’ll cover everything you need to know about the dates, changes, and how to get your return sorted early. 

Oh, and before we forget, here’s a disclaimer: this guide is for general information only. For specific advice on your own situation, speak to an accountant or check GOV.UK. 

Who needs to file for Self Assessment and why?

If you've ever worked for an employer, your tax was probably taken care of for you through PAYE before your wages even hit your account. Once you're self-employed, though, that job falls to you, and that's where Self Assessment comes in.

Self Assessment is HMRC’s way of collecting Income Tax on money that isn’t taxed automatically. So if you’re a sole trader earning more than £1,000 a year, or you have other untaxed income such as rent from a property, you’ll usually need to file a tax return and pay whatever you owe.

Key Self Assessment dates to know

Before anything else, it’s essential you know your deadlines. The return you'll file next covers the 2025/26 tax year, so you'll be reporting the income you earned between 6 April 2025 and 5 April 2026. With that in mind, here are the key dates to put in your diary:

• 31 October 2026: Deadline for paper tax returns.

• 31 January 2027: Deadline for online tax returns, and for paying any tax you owe for 2025/26, plus your first payment on account for 2026/27.

• 31 July 2027: Deadline for your second payment on account for 2026/27.

Make sure to jot these dates down! And if you've never filed before, you should have registered for Self Assessment by 5 October 2026. If you missed that date, register as soon as possible, because you'll need your Unique Taxpayer Reference (UTR) before you can file.

Why preparing early pays off

You might be wondering why we’re talking about preparing to file early. Filing early doesn't mean paying early, and being prepared comes with many advantages. For example, you can submit your return in November and still pay on 31 January, while enjoying these hard-to-ignore benefits: 

• You'll know your bill sooner: No nasty surprises in January, and more time to save up if you owe more than expected.

• You'll avoid penalties: Getting everything done early is a sure-fire way to avoid missing the online deadline, and HMRC charges an automatic £100 penalty, even if you don't owe any tax. After three months, daily penalties start to seriously add up!

• You'll get refunds faster: This is the best part: if you've overpaid, filing early actually means your money comes back sooner (hooray!)

• You'll have time to fix mistakes: If you start with plenty of time, missing paperwork or a confusing expense becomes far easier to sort out in November than on 30 January.

• You'll beat the rush: HMRC’s helplines and accountants get very busy in January. If you get stuck on a login, a lost UTR or a tricky expense, filing early means you can get answers quickly, without the long wait. 

How to prepare for Self Assessment: seven steps

Right, time to get down to business. How do you actually get ready to file for self-assessment? We’ve simplified it down to seven easy steps.

1. Check whether you need to file at all 

Just because you are self-employed does not automatically mean you need to file, although it’s likely that you will have to. You'll generally need to file a return if you earned more than £1,000 from self-employment in the tax year. So, for example, if you’ve been earning money on the side, you’ll only need to file if your earnings have exceeded that £1,000 threshold. Keep in mind that you may also need to file if you have other untaxed income, such as rental income.

2. Get your HMRC login sorted

There’s nothing worse than sitting down to finally file your return, only to be stopped in your tracks by something as insignificant-seeming as a forgotten password. Before January creeps up on you, make sure you can sign in to your HMRC online account and have your UTR (Unique Taxpayer Reference) to hand. If you’ve lost it, or need a new activation code, HMRC may have to send it by post, which can take up to 10 days. Sort it now, and January you will thank you. 

3. Gather your records

Now for the really important bit: your records. This is where the magic (or the panic) happens, so it’s worth taking your time. Pull together everything that shows the money coming in and going out of your business between 6 April 2025 and 5 April 2026, including: 

• Sales records and invoices

• Business bank statements

• Receipts for business expenses

• Records of any other income, such as interest or rental income

• Details of pension contributions or Gift Aid donations, which could reduce your bill

If your records are scattered across emails, shoeboxes and spreadsheets, you might want to set aside a few hours to put them in one place. Trust us when we say that this will make everything a lot easier.

4. Claim all your allowable expenses

Now for the bit that can actually put money back in your pocket! From stock deliveries to your monthly phone bill, many of the costs of running your business count as allowable expenses, and every one you claim reduces your taxable profit, and your tax bill with it. It’s easy to forget the small stuff, so go through your bank statements and look out for things like:

• Stock and materials

• Equipment and tools

• Rent, business rates and utilities for business premises

• Phone and internet costs for business use

• Travel for business (but not your daily commute, sadly)

• Marketing and website costs

• Software, including your POS and accounting software

• Accountant and bank fees

Oh, and if you work from home, you can claim a share of household costs like heating and electricity, or use HMRC’s flat-rate simplified expenses instead. Either way, make sure you keep your receipts, as HMRC can ask to see them.

5. Estimate your tax bill and set money aside

Nobody likes a surprise bill, especially one from HMRC. As a sole trader, you’ll pay Income Tax and Class 4 National Insurance on your profits, and both are due by 31 January 2027 for the 2025/26 tax year. Having a rough idea of what you’ll owe now means you can be better prepared when it’s time to make the payment. 

For 2025/26, the first £12,570 you earn is usually tax-free thanks to your personal allowance. In England, Wales and Northern Ireland, you’ll then pay 20% basic-rate tax on income up to £50,270. Scotland has its own rates and bands, so check those if you live north of the border. On top of that, Class 4 National Insurance is 6% on profits between £12,570 and £50,270, and 2% above that, wherever you are in the UK.

So, if you’re wondering how to stay prepared when the final cost is still unknown, we have just the trick. Every time you get paid, move a slice of it into a separate savings account. Many sole traders set aside 20–30% of their income, so when the bill lands, you’ve already got a solid chunk of money waiting. 

6. Understand payments on account

Ok, so here’s the thing that really trips up a lot of first-time filers. If your tax bill comes to more than £1,000, HMRC will usually ask you to make payments on account. Think of these as advance payments towards next year’s tax, each worth half of this year’s bill (yes, we know, it’s confusing!). 

So on 31 January 2027, you might find yourself paying your full 2025/26 bill plus half of your expected 2026/27 bill. For example, a £4,000 tax bill could mean paying £6,000 in January, then another £2,000 in July. It isn’t extra tax, just some of next year’s tax paid early, but it’s a big chunk to find in one go if you weren’t expecting it.

The good news is that if you think your profits will drop this year, you can ask HMRC to reduce your payments on account. Just be realistic, because if you reduce them too much and end up owing more, HMRC will charge interest on the difference. And if you also have a job and more than 80% of your tax is already taken through PAYE, you won’t need to make payments on account at all. 

7. Check whether Making Tax Digital affects you

This is a biggie for 2026, so we’re actually going to give it its own section. 

Making Tax Digital: what's changing for sole traders

If you've heard the phrase Making Tax Digital floating around and wondered whether it applies to you, here's the short version.

Making Tax Digital (MTD) for Income Tax is HMRC's plan to move tax records online, and it became mandatory on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. If that's you, instead of doing everything once a year, you now need to:

• Keep digital records of your income and expenses

• Use HMRC-compatible software

• Send HMRC a quick update every three months

• File a final tax return at the end of the year, as usual

And it isn't stopping there. Over the next two years, MTD will gradually include more sole traders:

• April 2026: qualifying income over £50,000

• April 2027: qualifying income over £30,000

• April 2028: qualifying income over £20,000

What this means for your 2025/26 return

Here's the reassuring bit: even if you joined MTD in April 2026, you'll still file your 2025/26 return the usual way by 31 January 2027. That's because it covers a period before MTD started, so nothing changes for this one.

Why this return matters more than usual

That said, this year’s return does come with a twist. HMRC will look at the income on your 2025/26 return to decide whether you need to join MTD in April 2027. So if your qualifying income from self-employment and property comes to more than £30,000, you’ll probably need to start keeping digital records and sending quarterly updates from next April.

And here’s the bit that catches people out: qualifying income is your total turnover before expenses, not your profit. That means even if you only take home £20,000 after costs, you could still be in scope if your sales top £30,000. The upside of filing early is that you’ll know exactly where you stand, and you’ll have a few months to find the right software and get comfortable with it before April rolls around.

Common mistakes to avoid

Even the most organised sole traders slip up now and then. If you feel that there’s a lot to keep on top of while also juggling your business at the same time, you’re not alone. So to help you stay on track, here are the most common pitfalls and how to sidestep them:

• Leaving it to the last week: Like we said before, get on top of things as soon as possible! Missing documents and login problems are much harder to fix when the clock's ticking.

• Forgetting payments on account: These have a habit of sneaking up on people, especially in their first or second year of filing. Nothing takes the shine off January quite like a bill that’s 50% bigger than you expected, so build them into your budget early. The last thing you want is a penalty fee on top of the tax owed!

• Mixing business and personal spending: Bundling everything into one account is a recipe for a mix-up. A separate business bank account keeps your records cleaner and makes your return much quicker to complete.

• Under-claiming expenses: Claim everything relevant! Small costs like parking, postage and receipt rolls add up over a year, so don't make the mistake of leaving money on the table.

• Guessing your figures: Keep your receipts and paperwork and go easy on the paperwork clearing sprees! Use your real records rather than estimates from memory. HMRC can ask you to back up what you've reported.

Your secret weapon for a stress-free tax return

The easiest returns start with good records kept all year round. If you run a shop, café or salon, your POS system is already recording every sale, so there's no need to rebuild your income from bank statements in January. (New to POS? Our complete guide to POS systems explains how they work.)

With Epos Now, you can pull sales reports for any period, including the full tax year, in a few clicks. If you want to make the most of them, take a look at our blog on the 8 most useful reports you can run in Epos Now. You can also connect your POS to accounting software through the Epos Now App Store, so your sales data flows straight into your books. That makes your Self Assessment simpler now, and puts you in a strong position if Making Tax Digital applies to you from April 2027.

Ready to say goodbye to the January rush forever?

Ready for the start of a whole new self-employed you and leave the Self Assessment January panic behind? While it can sound like a long to-do list, it all starts with a few small steps. Sort out your login, round up your records, claim every expense you’re entitled to, and put a little aside for those payments on account. And if your income is over £30,000, start getting to grips with Making Tax Digital now, so next April feels like a fresh start rather than another mad dash. 

Slowly but surely, a few hours here and there this autumn could save you a lot of stress in the new year, and possibly a penalty too. And if your tax affairs are on the complicated side, it’s well worth getting an accountant on board to help.