What expenses can a sole trader claim in 2025?

Filing Self Assessment matters if you run a business as a sole trader. Get this right and you avoid penalties, plan your cash flow, and make smarter decisions about tax and take-home pay. Here’s what you need to know.

Who must register and when

If you earned untaxed income during the tax year, you must register for Self Assessment with HMRC. New sole traders must register by 5 October following the end of the tax year to avoid penalties.

Key deadlines you cannot miss

Paper returns must be with HMRC by 31 October. Online returns must be submitted by 31 January; that is also the usual deadline for paying any tax due. If you want HMRC to collect your Self Assessment bill via your tax code, submit by 30 December. Missing the 31 January deadline triggers an automatic £100 penalty, with further penalties if the return remains outstanding.

What goes on the return

Declare all business income and allowable expenses for the tax year. You can use the cash basis to calculate income and expenses if eligible; this means you account for money when it arrives and when you pay it out, which simplifies bookkeeping for many small sole traders. You do not send receipts with the return, but you must keep them in case HMRC asks.

Allowable expenses to report

Common allowable expenses include office costs, travel and subsistence for business journeys, uniforms and protective clothing, staff and subcontractor payments, stock and materials, business insurance and bank charges, premises costs including a fair proportion of home running costs where applicable, marketing and training directly related to the trade. Only claim the business portion when costs are mixed.

Record keeping and Making Tax Digital

From 2026 Making Tax Digital for Income Tax Self Assessment will be introduced in phases; sole traders should prepare to keep digital records and to submit periodic reports through approved software when required. Even before that change becomes mandatory, using cloud accounting makes Self Assessment faster and reduces errors.

Penalties and how to avoid them

Penalties start with a fixed fine for late filing, and grow if you delay further. If you cannot pay on time, contact HMRC as soon as possible; they often agree Time to Pay arrangements. File early where you can; it gives you time to spot and fix errors and plan how to pay any tax due.

Practical tips for sole traders

• Register for Self Assessment as soon as you start trading; don’t wait.

• Use the cash basis if it suits your business; it often simplifies small business accounting.

• Keep digital records of income and expenses; store receipts and invoices for at least the minimum period HMRC requires.

 • Consider flat rate simplified expenses for home and vehicle costs if that reduces bookkeeping.

• If you expect difficulty paying your bill, contact HMRC early to discuss a payment plan.

How an accountant can help

An accountant can prepare self-assessment returns, advise on what is allowable, set up Making Tax Digital compliant records, and help with cloud accounting tools so you see income and expenses in real time. They can also coach you on financial planning to spot savings and tax efficiencies. 

Self-Assessment for Employees: What You Need to Know for Tax Filing

 

In the UK, most employees have their taxes automatically deducted from their wages through the Pay As You Earn (PAYE) system. However, there are situations where you may need to complete a Self-Assessment tax return, even if you are employed. This process can seem daunting, but understanding when and why it's necessary can help ensure you're meeting your tax obligations. Here’s everything you need to know about Self-Assessment for employees.

When Do Employees Need to Complete a Self-Assessment?

While most employees pay tax through PAYE, there are certain circumstances where you’ll need to file a Self-Assessment tax return. These include:

1. Additional Income: If you have income outside your employment, such as from freelancing, rental income, or investments, you'll need to declare it through Self-Assessment. This applies if your income from these sources exceeds £1,000 in a tax year.
2. High Earnings: If you earn over £100,000 annually, you’ll generally be required to file a Self-Assessment tax return, even if your income is fully taxed through PAYE.
3. Claiming Certain Tax Reliefs: Some tax reliefs, like those for charitable donations or professional subscriptions, can only be claimed through Self-Assessment. If you qualify for these, you’ll need to complete the tax return to adjust your tax liability.
4. Receiving Benefits in Kind: If your employer provides you with benefits, such as a company car or health insurance, and the value of these benefits exceeds £2,500 per year, you may need to submit a Self-Assessment return to report these benefits.
5. Self-Employed or Mixed Employment: If you're both employed and self-employed, you’ll need to file a Self-Assessment to declare all your income. Even part-time self-employed income requires a tax return.

How to Complete Your Self-Assessment

1. Register with HMRC: If you’ve never filed a Self-Assessment before, the first step is to register with HMRC. You’ll receive a Unique Taxpayer Reference (UTR) number, which you’ll need to complete your return.
2. Gather Your Documents: Collect all necessary documents before starting your tax return. This may include:
• Your P60 or P45 (documents detailing your employment income)
• Records of additional income (e.g., freelance invoices, rental income)
• Records of allowable expenses, such as business costs or charitable donations
• Information about any benefits in kind received
3. Complete Your Tax Return: You can file your Self-Assessment online via HMRC's website or on paper. The online process is quicker and offers additional tools to help guide you through the form. You’ll need to report all income, and you’ll be able to claim any relevant tax reliefs and allowances. Be sure to enter your income accurately to avoid penalties.
4. Submit on Time: The deadline for online submissions is 31 January following the end of the tax year (which ends on 5 April). For paper submissions, the deadline is 31 October. Failing to submit on time can result in late filing penalties.

Common Mistakes to Avoid

• Incorrectly Reporting Income: Always report your income accurately. If you're unsure about how to report freelance or rental income, consult with a tax professional to ensure you're claiming correctly.
• Missing Deductions: You may be entitled to deductions for business expenses, charitable donations, or pension contributions. Ensure you claim all eligible expenses to reduce your tax liability.
• Late Submission: Missing the deadline will lead to automatic penalties, so make sure you submit your return well in advance.

What Happens After Submission?

Once your return is submitted, HMRC will calculate how much tax you owe based on the income and expenses reported. If you owe any tax, you will be required to pay by the 31 January deadline. If you’re due a refund, HMRC will issue it after processing your return.

Filing a Self-Assessment tax return as an employee can seem like a complex task, but understanding when and how to do it can make the process much easier. Whether it’s due to additional income, benefits, or other factors, ensuring that you file on time and correctly is essential to avoid penalties and ensure you're paying the right amount of tax. If you're unsure about any part of the process, it’s a good idea to seek guidance from a tax professional to ensure you meet your tax obligations.