Question 1

Does a sole trader need an accountant?

Accepted Answer

No, it's not legally required, but 87% of sole traders who use an accountant save more in tax than the accountant costs. You can file your own Self Assessment tax return through HMRC's online portal for free. However, professional accountancy typically saves £1,500-£3,000 annually through legitimate expense claims, allowances, and tax planning that most sole traders miss when filing themselves. When you definitely need an accountant: turnover over £30,000 where complexity increases, multiple income sources such as employment plus self-employment plus rental, CIS deductions to claim back, approaching £85,000 VAT threshold, planning to incorporate as a limited company, or facing Making Tax Digital from April 2026 if you have £50k+ turnover. HMRC reported 68% of self-filed sole trader returns contained errors in 2024, with average penalties of £450 per mistake. Common errors include miscategorised expenses, missed allowances for home office and mileage, and incorrect National Insurance calculations. At Strix Accountancy, our sole trader service starts from £200 annually. Most Walsall and Birmingham clients save 5-10 times our fee through better tax planning.

Question 2

How much does an accountant cost for a sole trader?

Accepted Answer

Accountant fees for sole traders range from £150-£400 annually for Self Assessment tax returns, depending on income complexity and number of revenue streams.
Strix Accountancy pricing (2025/26):

Simple sole trader (one income source): £200-£250/year
Multiple income sources (self-employed + rental/CIS): £250-£350/year
Complex returns (overseas income, capital gains): £350-£400/year

What’s included:
Complete SA100 Self Assessment preparation, Income Tax and National Insurance calculations, identification of all allowable expenses and reliefs, submission to HMRC before 31st January deadline, and support with HMRC queries.
Cost vs savings example:
A sole trader plumber earning £45,000 might pay £250 for accountancy but save £2,500 through proper mileage claims (45p per mile for 8,000 business miles = £3,600 deduction), home office expenses (£312 annually using simplified method), and tool/equipment allowances.
Cheap accountants warning: Online services charging £119 typically offer basic form-filling with no tax planning, no phone support, and no HMRC representation. You get what you pay for.
Get your instant quote using our calculator above—transparent, fixed-fee pricing with no hidden costs. Walsall, Birmingham, and UK-wide service available.

Question 3

What can I claim as expenses as a sole trader?

Accepted Answer

You can claim any expense that is wholly and exclusively for business purposes, reducing your taxable profit and saving 20-45% in Income Tax and National Insurance on every pound claimed. Most commonly missed expenses include home office costs at £6 per week or £312 per year using simplified method or actual costs such as portion of rent, bills, council tax, and internet; mileage at 45p per mile for first 10,000 miles then 25p per mile thereafter for business travel only not commuting; mobile phone and broadband proportion used for business; professional subscriptions for industry body memberships and professional insurance; training and development including courses, books, and conferences related to your trade; equipment and tools including computers, machinery, and tools which are 100% deductible under £1,000 or capital allowances; marketing including website costs, business cards, and advertising; and professional fees including accountancy, legal advice, and bank charges. What you CANNOT claim: personal expenses or dual-purpose items such as clothing unless specialist uniform, commuting from home to your regular workplace, or client entertainment including meals, drinks, and gifts over £50. Keep all receipts, invoices, and records for at least 5 years from 31st January filing deadline as HMRC can investigate and disallow expenses without proper evidence plus charge penalties.

Question 4

When is the Self Assessment deadline for sole traders?

Accepted Answer

The online Self Assessment deadline is 11:59pm on 31st January 2026 for the 2024/25 tax year (income earned 6 April 2024 to 5 April 2025). The paper deadline is 31st October 2025.
Critical 2025/26 deadlines:

5 October 2025: Register for Self Assessment if newly self-employed in 2024/25
31 October 2025: Paper tax return deadline (HMRC must receive by this date)
31 January 2026: Online tax return AND payment deadline
31 July 2026: Second payment on account deadline (if applicable)

Late filing penalties (automatic):

£100 if 1 day late (even if no tax owed)
£10 per day after 3 months late (maximum £900)
£300 or 5% of tax due (whichever is higher) after 6 months
£300 or 5% of tax due (whichever is higher) after 12 months

Late payment penalties:

5% of unpaid tax if 30 days late
Additional 5% if 6 months late
Additional 5% if 12 months late
Plus daily interest at 7.75% on unpaid tax

Payments on account: If your tax bill exceeds £1,000, you’ll make two advance payments for next year (31 January and 31 July), each half of your previous year’s bill.
Deadline approaching? At Strix Accountancy, we handle last-minute returns regularly. Book an urgent consultation now—we can typically prepare and file returns within 48-72 hours if you provide documents promptly. Don’t risk penalties.

Question 5

What is the difference between sole trader and self-employed?

Accepted Answer

There is no practical difference as sole trader and self-employed mean the same thing for tax purposes. Both describe individuals running unincorporated businesses, personally liable for debts, and filing Self Assessment tax returns. Self-employed is the broader HMRC term for anyone working for themselves which includes sole traders, business partners, and some company directors. Sole trader specifically means self-employed without a partnership or limited company structure. Key characteristics of sole traders and self-employed: you and your business are legally the same entity, personal liability for all business debts, keep all profits after tax with no separate business or personal distinction, file Self Assessment tax return annually, pay Income Tax at 20-45% and Class 2 and 4 National Insurance, and simple to set up by registering with HMRC and start trading. What you're NOT: limited company which is separate legal entity paying Corporation Tax with directors taking salary and dividends, partnership with two or more people sharing business ownership and profits, or employee working for someone else under PAYE. Most sole traders switch to limited company status when profits exceed £50,000-£60,000 annually as Corporation Tax at 19-25% becomes more efficient than Income Tax at 40%+.

Question 6

Do I need to register as a sole trader if I earn under £1,000?

Accepted Answer

No, you don't need to register for Self Assessment or pay tax if your total self-employed income is under £1,000 per year thanks to the Trading Allowance introduced in 2017. The £1,000 Trading Allowance covers self-employed income, casual earnings, and side hustles, is automatic without needing to claim it, is tax-free with no Income Tax or National Insurance due, and requires no registration if total self-employed income stays below £1,000. When you MUST register even under £1,000: total income from employment plus self-employment exceeds £100,000, you need to claim self-employed losses against other income, or you want to pay Class 2 National Insurance voluntarily for State Pension qualification. Once self-employed income exceeds £1,000 you must register with HMRC by 5 October following the tax year you started trading. For example if you earned £1,200 in 2024/25 from April 2024 to April 2025 register by 5 October 2025. If you earn £1,000-£2,500 from self-employment you can choose between claiming the £1,000 Trading Allowance paying tax on income above £1,000 with no expenses claimed, or claiming actual expenses which saves more tax if expenses exceed £1,000. Register immediately to avoid late registration penalties of £100 minimum.

Question 7

Can I switch from sole trader to limited company mid-year?

Accepted Answer

Yes you can incorporate mid-tax-year but it requires careful planning to avoid double taxation, missed allowances, and HMRC complications. You can form a limited company any time during the tax year from April to April. However you'll need to file final sole trader Self Assessment for partial year from 6 April to incorporation date, submit limited company accounts and Corporation Tax return from incorporation date to company year-end, properly transfer assets, clients, and contracts to the new company, and close sole trader status with HMRC. Tax implications: sole trader profits up to incorporation date are taxed as Income Tax at 20-45% plus National Insurance, company profits after incorporation pay Corporation Tax at 19-25% then salary and dividends for personal income, overlap relief may apply if you've previously claimed overlap relief as a sole trader, and capital allowances must be calculated carefully to avoid double-claiming. Common mistakes: not formally ceasing sole trader status when HMRC expects two tax returns, transferring assets at wrong valuation triggering Capital Gains Tax, continuing to invoice clients personally instead of through limited company, and missing business rates and VAT registration changes. Most accountants recommend incorporating at tax year-end on 5 April for cleaner accounting and simpler tax filings. At Strix Accountancy we handle mid-year incorporations for Walsall and Birmingham clients regularly managing the transition, dual tax filings, and asset transfers.

Question 8

How do I claim mileage as a sole trader?

Accepted Answer

Use HMRC's simplified mileage rate of 45p per mile for the first 10,000 business miles per tax year then 25p per mile thereafter. This covers all vehicle running costs including fuel, insurance, servicing, and depreciation. What counts as business mileage: travel between different business locations or client sites, travel to temporary workplaces under 24 months, business-related errands to bank, suppliers, or post office, and travel from home to clients if home is your business base. What does NOT count: commuting from home to a permanent workplace, personal journeys, or travel between home and a fixed office you rent. How to claim: keep detailed mileage log with date, start and end location, business purpose, and miles; calculate total business miles for tax year; multiply by 45p for first 10,000 miles and 25p for additional miles; and claim as business expense on Self Assessment. Example calculation for 2024/25: 12,000 business miles driven means first 10,000 miles at 10,000 × £0.45 equals £4,500 and additional 2,000 miles at 2,000 × £0.25 equals £500 for total deduction of £5,000. This saves £1,000 in tax for 20% taxpayer or £2,000 for 40% taxpayer. Alternative actual costs method: instead of simplified rates claim actual vehicle expenses such as fuel, insurance, repairs, and depreciation proportionate to business use. Only worthwhile if actual costs significantly exceed simplified rates and requires extensive record-keeping. HMRC may challenge claims without proper records.

Question 9

What happens if I miss the 31st January Self Assessment deadline?

Accepted Answer

Automatic penalties start immediately even if you owe no tax and escalate rapidly the longer your return remains unfiled. Penalty timeline for 2025/26 tax year: 1 day late on 1 Feb 2026 incurs £100 fixed penalty even if no tax owed or full payment made, 3 months late on 1 May 2026 adds £10 per day for maximum 90 days equalling £900, 6 months late on 1 Aug 2026 adds £300 or 5% of tax owed whichever is greater, and 12 months late on 1 Feb 2027 adds another £300 or 5% of tax owed whichever is greater. Late payment penalties separate from filing penalties: 30 days after 31 Jan adds 5% of unpaid tax, 6 months after 31 Jan adds additional 5% of any still-unpaid tax, 12 months after 31 Jan adds additional 5% of any still-unpaid tax, plus interest at 7.75% per year on unpaid tax from 31 January. Worst case scenario 12 months late includes £100 initial penalty, £900 daily penalties, £300 plus 5% of tax at 6 months, £300 plus 5% of tax at 12 months, 15% total penalties on tax owed, and interest charges. For example £5,000 tax bill results in £2,350+ in penalties and interest. HMRC may waive penalties if you have a reasonable excuse such as serious illness, bereavement, fire or flood, or postal delays. Already late means file immediately to prevent further penalties. At Strix Accountancy we handle late returns urgently typically completed within 48-72 hours.

Question 10

When does Making Tax Digital affect sole traders earning over £50,000?

Accepted Answer

Making Tax Digital for Income Tax MTD ITSA becomes mandatory from 6 April 2026 for sole traders with gross income over £50,000 fundamentally changing how you report income and file tax returns. MTD ITSA rollout timeline: 6 April 2026 for sole traders and landlords with income over £50,000 previously £30,000 with threshold increased in 2024, April 2027 extended to income over £30,000 with date to be confirmed, and April 2028 extended to income over £20,000 with date to be confirmed. What changes under MTD: use MTD-compatible software such as Xero, QuickBooks, or FreeAgent for all record-keeping, submit quarterly updates to HMRC within 4 times per year not traditional deadlines, file End of Period Statement after each accounting period, submit Final Declaration by 31 January replacing Self Assessment, and no more paper records or basic spreadsheets. Key differences from Self Assessment: digital-only record-keeping with no paper or simple Excel, quarterly reporting instead of annual, software must connect to HMRC via API, and penalties for non-compliance. If your gross income before expenses from self-employment AND OR property exceeds £50,000 you're in scope from April 2026. This includes combined income such as £30,000 self-employed plus £25,000 rental equals £55,000 total so MTD applies. Action needed NOW if you're in scope for April 2026: choose MTD-compatible software, digitise all record-keeping processes, learn quarterly submission requirements, consider professional support as DIY MTD is complex, and file final Self Assessment for 2025/26 tax year due 31 January 2027. At Strix Accountancy we're MTD specialists helping Walsall and Birmingham sole traders prepare for April 2026.

Sole Trader Accounts and Tax Return

Sole Trader Accounts and Tax Return Service

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