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Posted: Thu 2nd Jul 2026
Self Assessment has a reputation for being more painful than it needs to be.
But for many London small business owners, the key is simply finding the time to understand what HMRC expects from you, keeping records while running the business, and avoiding a last-minute scramble in January.
This blog explains when Self Assessment applies, what you need to submit and how to stay on top of it without causing yourself needless stress.
Self Assessment is a tax return process. You tell HMRC what income you received during the tax year, what allowable business expenses you had and how much tax you have already paid.
HMRC then works out what you owe, or you can calculate it yourself through accounting software or your accountant.
The UK tax year runs from 6 April to 5 April. So the 2025 to 2026 tax year started on 6 April 2025 and ended on 5 April 2026.
You usually need to send a Self Assessment tax return if you were self-employed as a sole trader and earned more than £1,000 before expenses in the tax year.
A sole trader is someone who runs their own business as an individual rather than through a limited company.
You may also need to complete a return if you:
Are a partner in a business partnership.
Receive untaxed income.
Earn money from property, tips, commission, savings, investments, dividends or overseas income.
For London founders, this can crop up in very ordinary ways.
You might run a design business from home, sell handmade products at markets across the city, take on freelance projects alongside a PAYE job or start charging clients before you've thought properly about tax.
Once money starts coming in, it's worth checking whether Self Assessment applies to you.
The key point is that HMRC won't always know your full position automatically. If your income is not fully taxed at source, you may need to tell HMRC yourself.
You may need to register for Self Assessment if you:
Start working for yourself as a freelancer, consultant or sole trader.
Earn more than £1,000 from self-employment before expenses.
Become a partner in a business partnership.
Receive rental income from property.
Earn side income that isn't taxed through PAYE (Pay As You Earn).
Receive dividends, investment income or foreign income that needs reporting.
Need to pay the High Income Child Benefit Charge and it isn't collected through PAYE.
If you need to complete a tax return for a tax year and haven't sent one before, you must tell HMRC by 5 October after that tax year ends.
For example, if you started freelancing during the 2025 to 2026 tax year, you would usually need to register by 5 October 2026.
This is one deadline that often catches people out because it comes before the filing deadline. You don't wait until January to register. You register first, then file later.
A Self Assessment return asks for details of your income and, where relevant, your expenses. The exact sections depend on your circumstances.
For a small business owner or sole trader, this may include:
Income from sales, services or freelance work.
Business expenses you want to claim (explained below).
Employment income, if you also have a job.
Pension contributions.
Student loan repayments, if relevant.
Savings interest, dividends or other investment income.
Property income.
Any tax you've already paid.
Business expenses are costs that are wholly and exclusively for running your business.
That doesn't mean every cost in your life becomes tax-deductible because you work for yourself. It means the cost must be genuinely connected to your business.
Typical examples include:
Software subscriptions.
Stock.
Materials.
Accountancy fees.
Business insurance.
Marketing costs.
Travel for business purposes.
A proportion of home office costs if you work from home.
The important word here is "allowable". An allowable expense is a business cost HMRC lets you deduct from your income before calculating your taxable profit.
If you're not sure whether something counts, don't guess. Check HMRC guidance or ask an accountant.
For most people, the key Self Assessment deadlines are:
5 October: register for Self Assessment if you need to complete a return for the previous tax year and haven't already registered.
31 October: deadline for paper tax returns.
31 January: deadline for online tax returns and paying the tax you owe.
31 July: second payment on account, if this applies to you.
Most small business owners file online. For the 2025 to 2026 tax year, the online filing and payment deadline is 31 January 2027.
It's sensible to file earlier than this if you can. Filing early doesn't mean you have to pay early. It simply tells you what the bill is, which gives you more time to plan.
When you file your return, HMRC calculates your tax bill.
This may include Income Tax, Class 2 and Class 4 National Insurance for self-employed people and any other amounts due, depending on your circumstances.
If you're used to PAYE, the Self Assessment payment system can feel uncomfortable at first because tax isn't deducted from each invoice or sale. You receive the money, then you need to set aside enough to pay HMRC later.
A common approach is to move a percentage of each payment into a separate tax savings account. The right percentage depends on your profit, other income and tax position.
Many sole traders start with 20% to 30% as a rough working habit, then adjust once they understand their actual bill.
This isn't a tax calculation, but it can stop you treating all incoming cash as available spending money.
Payments on account are one of the biggest Self Assessment surprises. They are advance payments towards your next tax bill.
HMRC usually asks for them if your Self Assessment tax bill is £1,000 or more and less than 80% of your tax has already been collected at source, such as through PAYE.
Each payment on account is usually half of your previous year's tax bill. One is due by 31 January and the other by 31 July.
Example:
If your tax bill for the year is £4,000, you may also need to make a first payment on account of £2,000 towards the following year.
That means the amount due on 31 January could be £6,000, not £4,000. A second payment of £2,000 would then usually be due by 31 July.
That can feel like a shock if it's your first year in the Self Assessment system.
It isn't a fine, and it isn't HMRC charging you twice for the same year. It's HMRC asking you to pay some of next year's tax in advance.
If your income has dropped and you know your next tax bill will be lower, you can ask HMRC to reduce your payments on account.
Be careful, though. If you reduce them too much, you may pay interest later.
Self Assessment often applies when income isn't fully taxed before you receive it.
It's common for sole traders, freelancers, consultants, landlords, business partners and people with meaningful untaxed side income.
It can also apply if you have a mix of employment and self-employment.
Example:
You might work for an employer during the week and run a photography business at weekends.
Your salary may be taxed through PAYE, but you may still need to report your photography income through Self Assessment.
PAYE – which stands for Pay As You Earn – is the system employers use to deduct income tax and National Insurance from wages before paying staff.
If you only have employment income and your employer handles your tax correctly through PAYE, you may not need to file a Self Assessment return.
The confusion often starts when people have more than one income stream.
Being employed doesn't automatically remove the need for Self Assessment. It simply means one part of your tax may already be handled.
There is also a difference between being self-employed and running a limited company.
A limited company has its own responsibilities for paying tax, including Corporation Tax.
But directors may still need Self Assessment in some circumstances (for example, if they receive dividends or have other income to report).
If you're not sure, use HMRC's online checker or speak to an accountant. It's better to check early than discover the issue after a deadline has passed.
The main risks with Self Assessment are:
Missing the deadlines for registering, filing returns or making payment.
Keeping inaccurate records.
If you file late, HMRC can charge an automatic £100 penalty. Further penalties can follow if you still don't file after three months, six months and 12 months.
If you pay tax late, HMRC can also charge late payment penalties and interest.
You can easily avoid these penalties. Most problems come from leaving the return until January, realising records are missing or underestimating how long it takes to get access to HMRC's systems.
Good record-keeping makes Self Assessment much easier. You should keep clear records of:
Income.
Invoices.
Receipts.
Bank statements.
Mileage.
Software costs.
Stock purchases.
Other business expenses.
Don't rely on memory. By the time January arrives, that "quick client trip" or "small software payment" from nine months ago may be hard to explain.
Accounting software can help by connecting to your bank account, categorising your transactions and keeping digital records in one place.
A spreadsheet can work for a simple business, but you must keep it up to date. The best system is the one you actually use every week.
Some sole traders manage Self Assessment themselves.
Others use an accountant, especially if they have mixed income, growing profits, VAT, staff, stock, a limited company or income from property.
A good accountant shouldn't just file the returns for you. They can help you understand what to put aside, what expenses are allowable and where your records need improving.
It's also worth being aware of Making Tax Digital for Income Tax.
New rules were introduced in April 2026 that mean sole traders and landlords with qualifying income over £50,000 must keep digital records, use compatible software and send quarterly updates to HMRC.
This will extend to more people in later years, so it's sensible to start building better habits now.
The easiest way to avoid any tax-related stress is to stop treating Self Assessment as a once-a-year job. Instead, set up a monthly routine.
Reconcile your bank transactions, save receipts, check unpaid invoices, update your records and move money into your tax savings account.
It may take less than an hour if you do it regularly. It can take days if you leave it for a year.
After the tax year ends on 5 April, pull your figures together early.
You don't need to wait until January. Filing in spring or summer gives you time to question anything that looks wrong, speak to your accountant and plan for the payment deadline.
Self Assessment is part of running a business, not a separate admin burden that appears once a year.
Once you understand the deadlines, keep decent records and set money aside as you go, it becomes much less intimidating.
The aim is to know where your business stands, what you owe and what cash is genuinely available.
And for a busy London SME or sole trader, that information is worth having long before the tax deadline arrives.
Note: This guide is for general information only and doesn't replace professional tax advice. If your circumstances are complex or you're not sure what applies to you, speak to HMRC or a qualified accountant.
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