What You Need to Know About Self Assessment

HM Revenue and Customs (HMRC) use the Self Assessment system to collect tax on earnings which don’t get taxed elsewhere. While the idea of submitting a tax return can be daunting, Self Assessment is normally more straightforward than it seems (once you get past the terminology).

Who needs to complete a Self Assessment tax return?

In most cases, anyone who receives untaxed income will need to submit a Self Assessment tax return to tell HMRC about it.

If you earn money from an employer then you’re normally taxed through PAYE, with your employer responsible for working out what you owe, deducting it from your wages, and passing it on to HMRC. It’s known as being ‘taxed at source’ but not all income is taxed this way.

For example, the invoice payment you get from a customer usually won’t be taxed before it reaches you. This means that you, as a self-employed person, must report this income yourself, and pay the right amount of tax on it.

Self Assessment tax returns aren’t just for self-employed people

Tax returns aren’t just for self-employed sole traders, and there might be other reasons you receive untaxed income, such as:

Use the online tool to check whether you need to complete a Self Assessment tax return.

What if some of my self-employed income is already taxed?

There are some cases where tax is deducted from your self-employed income before the payment is made. For example:

You’ll still need to submit your own tax return if either of these apply to you, but you’ll be able to tell HMRC about any tax you’ve paid already (so you won’t need to pay it again!).

How do I register for Self Assessment?

If you do need to complete a tax return, you can register for Self Assessment online, or you may be able to register by post in some circumstances.

The process is slightly different, depending on whether you’re self-employed, in a partnership, or if you’re not actually self-employed.

What happens after I register?

Once you register, HMRC will send out a Unique Taxpayer Reference number. You’ll need this to complete your annual Self Assessment tax return. Keep it safe!

What bookkeeping records do I need?

Bookkeeping is the process of keeping detailed records about every financial transaction which happens in your business. Keeping them well organised will help you keep track of what’s happening in the business, and make it much easier to prepare your tax return without losing your mind.

For most businesses, this means keeping a record of sales and business income, purchases, and other business expenses. Things like invoices, receipts, records of sales, and information about staff wages all need to be recorded in your bookkeeping.

Depending on your business, there might be other records that you need, too. For example, if hire subcontractors to do construction work then you’ll need to document everything for the Construction Industry Scheme.

What other records or documents might you need to keep?

If you’re both employed and self-employed, for example, you’ll need to keep your P60 so that you can include information about your salary, and how much tax you’ve paid on it through PAYE.

Another classic example is if you’re planning on claiming for vehicle costs using a flat rate for mileage, in which case you’ll need to track the details of each journey in order to work out your mileage.

How is my Self Assessment tax bill calculated?

Your Self Assessment bill is worked out based on:

Can I reduce my Self Assessment tax bill?

Rather than paying tax on all your income, your Self Assessment tax bill is based on your profits. The money you spend running your business can usually be offset as an expense against your tax bill.

Things such as stationery, travel costs, staff salaries, or stock and raw materials can all be claimed. It’s a bit confusing because ‘claiming expenses’ makes it seem like you’ll get the money back as a refund.

The reality is that you’re claiming tax relief against them. Basically, the cost of your allowable expenses is taken off your total income to calculate your profits. Your tax bill is then based on your profits.

Sadly, you can’t claim personal expenses as business expenses! You have to be able to show that any expense you claim for was incurred wholly as a result of your business.

The trading allowance

If you’re not already registered, and your total self-employed income is less that £1,000 in a tax year, you won’t need to register for Self Assessment or pay tax on it. If you are already registered, you’ll still need to submit a return.

You’ll then have the choice of either claiming the allowance, or claiming your expenses – not both. The good news is that it’s up to you which method you use to claim – so go for the one that reduces your tax bill the most!

Important dates to remember

The most important dates to remember are when you need to register for Self Assessment, when you need to submit your return, and when you need to pay your bill.

The deadline for registering

The deadline for registering for Self Assessment is 5th October, after the end of the tax year in which you start earning untaxed income.

The deadline for submitting a tax return

The deadline for submitting a Self Assessment tax return is 31st January, after the end of the tax year. For example, for a tax return for income earned in the 2025/26 tax year (which ended 5th April 2026), you’ll need to submit by 31st January 2027.

While this is the deadline, there are good reasons for submitting your tax return well ahead of time. If you’re due a tax rebate, you’ll get it sooner if you submit your tax return early.

It also gives you more time to make sure everything is right, and that you’re not missing out on any expenses. So leave yourself plenty of time!

The deadline for paying the bill

The deadline for paying your tax bill is the same as the deadline for submission. It’s 31st January after the end of the tax year. If you leave it late to submit your Self Assessment return, you’ll have to pay your bill very quickly after you’ve submitted it. It’s well worth speaking to HMRC if you’re worried about managing to pay your bill on time.

What are the penalties if you miss the submission or payment deadlines?

Unfortunately there are penalties for missing the deadline to submit your return or pay the bill. If your Self Assessment return is late, you’ll be given an automatic £100 penalty. This penalty increases according to how late you submit your return.

There are also separate penalties if you’re late paying your tax bill late, and you’ll be charged interest on late payments. Some penalties are given as a percentage of the tax you owe.

So, if you’re a whole year late for submitting your Self Assessment return, you can expect to be charged 15% of what you owe. Ouchie.

There are even penalties if you fail to register for Self Assessment in the first place.

You can appeal against penalties if you have a good reason, but you’ll need to make sure it’s a very good reason indeed!

What about Making Tax Digital Income Tax?

Making Tax Digital (MTD) is the government’s plan for improving the way that we all handle our taxes.

MTD Income Tax was introduced from 6th April 2026, replacing Self Assessment for sole traders and landlords whose turnover was above £50,000 in the 2024/25 tax year.

The threshold drops to £30,000 from April 2027, and £20,000 from April 2028. If you need to submit a tax return after this date and you’re affected by the rules, you’ll need to be compliant, keeping digital records and using software to submit your returns throughout the year.

While you can still carry on submitting an annual tax return in the same way until the changes come into effect, it might be a good idea to shift to using software now. Not only will you avoid a rush later on (and the panic that comes with it), but it’s also actually pretty helpful in other ways!

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.