Self Assessment basics for tradespeople
Self Assessment is the bit of self-employment nobody explains. You register, then a year later a form appears wanting numbers you didn't know you were supposed to keep, and there's a bill attached with an extra 50% bolted on that nobody warned you about.
It isn't complicated once you've seen it once. Here's the whole thing in plain English. Tax dates, thresholds and rates change — treat everything below as the shape of the system and confirm current figures on gov.uk, or ask an accountant.
What it actually is
If you work for an employer, tax comes out of your wages before you see it. Self-employed, nobody does that for you. Self Assessment is you telling HMRC what you earned and what you owe.
You total your income, subtract your allowable business expenses, and the difference is your profit. You're taxed on the profit — not on your turnover, and not on what's in your bank account.
That last point catches people out constantly. If you turned over £70,000 and spent £25,000 on materials, van and overheads, you're taxed on £45,000. Money you spent on the business isn't income.
Registering
You need to tell HMRC you're self-employed. There's a deadline for registering after you start trading — commonly by the 5 October following the end of the tax year in which you started — and penalties for missing it. Do it as soon as you start; there's no advantage to waiting.
You'll get a UTR (Unique Taxpayer Reference), a 10-digit number. Keep it somewhere you can find it. You'll need it for your return, for CIS, and every time you ring HMRC.
If you're doing construction work as a sub-contractor, register for CIS as well — being unregistered means a higher deduction taken from every payment. See getting paid as a subbie.
The dates that matter
| Date | What it is |
|---|---|
| 6 April – 5 April | The UK tax year |
| 5 October | Deadline to register for Self Assessment after starting (following the tax year you started) |
| 31 October | Paper return deadline |
| 31 January | Online return deadline, and the deadline to pay the tax for the year just ended |
| 31 January | First payment on account for the current year also due |
| 31 July | Second payment on account due |
The important one is 31 January. Miss the filing deadline and there's an automatic penalty even if you owe nothing, with further penalties and interest as it drags on. Verify the current penalty structure — it has been revised.
Making Tax Digital is extending to income tax for self-employed people and landlords above certain income thresholds, phased in over several years, which will mean quarterly digital updates rather than one annual return. Whether and when it applies to you depends on your income level and the current timetable — this is worth checking specifically, as the dates have moved more than once.
Payments on account — the nasty surprise
This is the one that ruins people's first January.
Once your tax bill passes a threshold, HMRC asks you to pay towards next year's tax in advance, in two instalments — each normally half of last year's bill.
So in your first proper January you may be asked for:
- The full tax for the year that just ended, plus
- Half of it again as your first payment on account
Then another half on 31 July.
That's 150% of your first tax bill due in one go, and it is the single most common reason a self-employed tradesperson's first January is a disaster. It isn't a penalty, it isn't a mistake, and you aren't being taxed twice — you're being moved onto paying in advance, and the changeover year is the expensive one.
Plan for it. If you've been putting money aside all year, it's uncomfortable. If you haven't, it's a catastrophe. How much to set aside for tax covers the arithmetic.
If your income has genuinely dropped, you can apply to reduce your payments on account — but if you reduce them too far you'll be charged interest on the shortfall. Don't use it as a way of deferring a bill you'll still owe.
What goes on the return
For most one-person trades it's a short list:
Income — everything you invoiced in the year, whether or not it's been paid, unless you use the cash basis (where you record money in and out when it moves — simpler, and available to smaller businesses; check the current eligibility rules).
Expenses — the allowable business costs. Materials, subcontractors, van running costs, tools, insurance, phone, accountant, protective clothing, scheme fees, training to maintain existing skills. The test is that a cost must be wholly and exclusively for the business.
Capital items — the van, big tools, equipment. These are handled differently from day-to-day costs, usually via capital allowances, which let you write off qualifying items against profit. The rules and annual limits change; check current ones.
CIS deductions — the tax already taken by contractors. Put it on the return and it comes off your bill. Many sub-contractors are due a refund.
Other income — employment, property, savings, dividends. Everything goes on the one return.
There's more detail on what counts and what doesn't in what you can claim as expenses.
The habits that make it a two-hour job
The return itself isn't the hard part. Reconstructing a year of records in January is.
Separate bank account. Not legally required as a sole trader, but the single biggest time-saver there is. Business in, business out, one account. Your accountant's fee will drop.
Photograph receipts the day you get them. In the van, on the phone, into one folder or an app. Faded thermal paper in a glovebox is not a record.
Do it monthly. An hour a month beats a weekend in January, every time.
File early. Filing in, say, June tells you in June what you'll owe in January. Filing on 30 January tells you the day before it's due. Same amount of tax; wildly different amount of stress. You still don't pay until 31 January.
Get an accountant. For a few hundred pounds a year they'll usually find more than they cost, keep you the right side of the rules, and take January off your plate. For a busy one-van trade this is close to a no-brainer.
More on the underlying record-keeping in keeping records for HMRC.
If you can't pay
Talk to HMRC. There's a Time to Pay arrangement for people who can't pay in one go, and they're considerably more reasonable if you ring before the deadline than after it. Interest applies, but it beats penalties and enforcement.
The worst option is not filing. File the return even if you can't pay the tax — the penalties for not filing are separate from, and on top of, the interest on unpaid tax.
The one-line version
Register early, keep the receipts, put money aside every month, file well before January, and remember that your first January is 150% of a normal one. Do those five things and Self Assessment is a minor administrative chore rather than the annual crisis it is for a lot of good tradespeople.
Records that are already tidy make January painless. QuoteSnap keeps every quote, job and customer in one place — so when it's time to add up the year, it's already added up. Try it free for 14 days.