Self-Assessment Tax Guide for UK Tradespeople — Everything You Need to Know

Tax is one of the least enjoyable parts of being self-employed, but getting it right is essential. If you are a sole trader tradesperson in the UK, you are required to file a self-assessment tax return every year and pay income tax and National Insurance on your profits. Get it wrong and you face penalties, interest charges, and unnecessary stress.

This guide explains the entire self-assessment process for tradespeople — from initial registration through to filing your return and paying what you owe. It covers allowable expenses, record keeping, payment on account, and the most common mistakes that land tradespeople in trouble with HMRC.

How Self-Assessment Works

Self-assessment is HMRC's system for collecting income tax from people who are not taxed at source — primarily self-employed people, but also those with additional income from property, investments, or other sources.

The UK tax year runs from the sixth of April to the fifth of April the following year. As a self-employed tradesperson, you need to report all your business income and expenses for each tax year, calculate your profit, and pay tax on that profit. You do this by filing a self-assessment tax return.

The Basic Calculation

Your tax bill is calculated on your taxable profit, which is your total income minus your allowable expenses. Here is the simplified version.

Total business income (everything you were paid for your work during the tax year) minus allowable business expenses (everything you spent running your business) equals taxable profit.

You then pay income tax and National Insurance on that taxable profit. Everyone gets a personal allowance — the amount you can earn before paying any income tax. For the 2025/26 tax year, the personal allowance is twelve thousand five hundred and seventy pounds. You only pay income tax on profit above this amount.

Income Tax Rates for 2025/26

The income tax rates for England and Wales are as follows. The basic rate of twenty per cent applies to taxable income between twelve thousand five hundred and seventy-one pounds and fifty thousand two hundred and seventy pounds. The higher rate of forty per cent applies to taxable income between fifty thousand two hundred and seventy-one pounds and one hundred and fifty thousand pounds. The additional rate of forty-five per cent applies to taxable income above one hundred and fifty thousand pounds.

Scotland has different rates and bands, so if you live in Scotland, check the Scottish income tax rates on the GOV.UK website.

National Insurance

As a self-employed person, you pay two types of National Insurance. Class 2 NI is a flat rate of three pounds forty-five per week (one hundred and seventy-nine pounds forty per year) if your profits exceed six thousand seven hundred and twenty-five pounds. Class 4 NI is six per cent on profits between twelve thousand five hundred and seventy pounds and fifty thousand two hundred and seventy pounds, plus two per cent on profits above fifty thousand two hundred and seventy pounds.

National Insurance is calculated and paid alongside your income tax through self-assessment.

Registering for Self-Assessment

If you are newly self-employed, you must register with HMRC for self-assessment. You can do this online at GOV.UK. The deadline for registration is the fifth of October in your business's second tax year, but you should register as soon as you start working for yourself.

For example, if you started self-employment in July 2025, you must register by the fifth of October 2026. However, there is no reason to wait — registering early means you receive your UTR (Unique Taxpayer Reference) sooner and can set up your online account well before you need to file.

Once registered, HMRC will send you a UTR number by post. This ten-digit number identifies you for tax purposes. Keep it safe — you will need it for tax returns, CIS registration, and other business interactions.

Key Deadlines You Must Know

Missing deadlines costs money. Here are the dates that matter for the 2025/26 tax year.

5 April 2026 — End of the 2025/26 tax year. All income and expenses up to this date go on your 2025/26 return.

31 October 2026 — Deadline for submitting a paper tax return. Hardly anyone uses paper returns anymore, but if you do, this is your deadline.

31 January 2027 — Deadline for submitting your online tax return AND paying any tax owed for 2025/26. This is also when your first payment on account for 2026/27 is due (more on that below).

31 July 2027 — Deadline for your second payment on account for 2026/27.

The critical date is the thirty-first of January. This is when most tradespeople encounter problems because both the return and the payment are due simultaneously. Do not leave it until January — the HMRC website slows to a crawl in the last week of January, and accountants are fully booked.

Allowable Expenses for Tradespeople

Claiming all your legitimate business expenses is the single most effective way to reduce your tax bill. Many tradespeople underclaim because they do not realise what qualifies or because they have lost receipts. Here is a comprehensive list of what you can claim.

Tools and Equipment

Every tool you buy for work is a business expense. Hand tools, power tools, safety equipment, test instruments, ladders, workbenches — all claimable. If a tool costs less than a few hundred pounds, you can claim the full cost in the year you bought it. For more expensive items, you may need to claim capital allowances over multiple years, though the Annual Investment Allowance (currently one million pounds) means most tradespeople can claim the full cost immediately.

Van and Vehicle Costs

You have two options for claiming vehicle expenses. The simplified method uses HMRC's flat mileage rates — forty-five pence per mile for the first ten thousand miles and twenty-five pence per mile after that. You need to keep a mileage log.

The actual cost method lets you claim the real costs of running your van — fuel, insurance, road tax, MOT, servicing, repairs, finance interest (not the capital repayment), and depreciation through capital allowances. If you use the van partly for personal use, you need to claim only the business proportion.

Generally, the actual cost method works out better for tradespeople who do moderate to high mileage and have significant vehicle costs. Once you choose a method for a particular vehicle, you must stick with it for the life of that vehicle.

Materials

Materials purchased for specific jobs are fully deductible. This includes building materials, plumbing supplies, electrical components, paint, timber — anything you buy to complete a customer's job. Materials that you buy for stock and have not used by the end of the tax year need to be accounted for separately as closing stock.

Insurance

All business insurance premiums are deductible — public liability, employers' liability, professional indemnity, tool insurance, and the business portion of your van insurance. For more on what insurance you need, see our trade business insurance guide.

Professional Services

Accountancy fees, legal fees related to your business, and professional subscriptions are all deductible. This includes trade body memberships (Federation of Master Builders, NICEIC, Gas Safe registration fees, etc.) and professional magazine subscriptions.

Office and Admin Costs

Phone bills (the business proportion), broadband, stationery, printer ink, computer equipment, and software subscriptions (including accounting software and quoting tools like QuoteSmith) are all claimable. If you work from home, you can claim a proportion of your household costs — HMRC offers a simplified flat rate of between ten and twenty-six pounds per month depending on hours worked, or you can calculate the actual proportion of home costs used for business.

Marketing and Advertising

Website hosting, business cards, vehicle signage, online advertising, directory listings (Checkatrade, MyBuilder, etc.), and any other marketing costs are fully deductible.

Training and Development

Training courses that update or maintain your existing skills are deductible. This includes refresher courses, new certification training within your existing trade, and health and safety courses. Training for an entirely new trade or qualification may not qualify — the rules here are nuanced, so check with your accountant.

Clothing and PPE

Protective clothing and equipment required for your work — safety boots, hard hats, hi-vis jackets, overalls, gloves, eye protection — are all deductible. Ordinary clothing is not deductible, even if you only wear it for work. The test is whether the clothing is specifically for protection or identification (like branded workwear), not simply everyday clothes you happen to wear on site.

CIS Deductions

If you work under the Construction Industry Scheme and have tax deducted from your payments by contractors, these deductions count towards your tax bill. Make sure you keep all CIS payment and deduction statements from contractors, as you will need the figures for your tax return. In many cases, your CIS deductions will cover most or all of your tax liability. For a full explanation, see our CIS scheme guide.

Record Keeping

HMRC requires you to keep records of all your business income and expenses. These records must be kept for at least five years after the thirty-first of January submission deadline for the relevant tax year. So records for 2025/26 (filed by January 2027) must be kept until at least January 2032.

What Records to Keep

You need to keep a record of all sales and income (invoices, bank statements showing payments received), all purchases and expenses (receipts, invoices from suppliers), all bank statements for your business account, and mileage records if you are using the simplified vehicle expenses method.

Going Digital

Paper receipts fade and get lost. The simplest approach is to photograph every receipt the day you get it and store it digitally. Apps like Dext (formerly Receipt Bank), FreeAgent, or even just a dedicated folder in your phone's photo gallery work well. Many accounting software packages let you snap receipts and they automatically extract the details.

With Making Tax Digital expanding to more self-employed people from April 2026, keeping digital records is becoming a requirement rather than an option. Getting into good digital habits now saves you a painful transition later.

Payment on Account

Payment on account catches many tradespeople off guard. It is HMRC's way of collecting tax in advance, and if you do not know about it, your January tax bill can be shockingly large.

How It Works

Once your tax bill exceeds one thousand pounds (and less than eighty per cent of it was collected at source through PAYE or CIS), HMRC requires you to make payments on account towards the next year's tax bill. Each payment on account is fifty per cent of the previous year's tax bill.

For example, if your 2025/26 tax bill is six thousand pounds, you pay the full six thousand pounds on the thirty-first of January 2027, plus a first payment on account of three thousand pounds towards 2026/27. On the thirty-first of July 2027, you make a second payment on account of three thousand pounds. When your 2026/27 return is filed, any remaining balance (or overpayment) is settled.

The First Year Shock

This means your first January tax bill can be up to one hundred and fifty per cent of your actual tax for the year — the full year's tax plus the first payment on account. Many tradespeople who do not plan for this find themselves unable to pay. The solution is simple: save a fixed percentage of everything you earn throughout the year. For most tradespeople, putting aside twenty-five to thirty per cent of your income in a separate savings account covers income tax, National Insurance, and payments on account comfortably.

Reducing Payments on Account

If you expect your income to be lower next year (for example, if you had an unusually busy year), you can apply to reduce your payments on account through your HMRC online account. Be careful with this — if you reduce them too much and your actual tax bill is higher than expected, HMRC charges interest on the underpayment.

Filing Your Tax Return

Filing your self-assessment tax return is not as complicated as many people fear, especially if your records are well organised.

Filing Online

The vast majority of self-employed people file online through HMRC's website. You need your Government Gateway login (set this up when you register for self-assessment), your UTR number, and your financial records for the tax year.

The online form guides you through each section. For a self-employed tradesperson, the key sections are your personal details, your employment income (if you also have a job), your self-employment income and expenses, and any other income.

HMRC's system calculates your tax automatically based on the figures you enter. Once you submit, you receive a calculation showing your tax liability and when it needs to be paid.

Using an Accountant

A good accountant handles the entire process for you. They prepare your accounts from your records, identify all allowable expenses, complete and submit the tax return, and advise on tax planning for the year ahead. For most tradespeople, the two hundred to five hundred pounds an accountant charges is money well spent — they almost always identify savings that more than cover their fee.

If you use an accountant, you still need to provide them with organised records. The better your records, the less time they spend (and the less they charge), and the more accurate your return.

Using Accounting Software

Tools like QuickBooks, Xero, and FreeAgent can generate most of the figures you need for your tax return automatically, provided you have been entering your transactions throughout the year. Some can even file the return directly with HMRC. This is a good middle ground between doing everything yourself and paying an accountant.

Penalties for Getting It Wrong

HMRC penalties are real and add up quickly. Understanding them is motivation enough to file on time.

Late Filing Penalties

One day late: Automatic one hundred pound penalty, even if you owe no tax.

Three months late: Daily penalties of ten pounds per day, up to a maximum of nine hundred pounds (in addition to the initial one hundred pounds).

Six months late: An additional penalty of five per cent of the tax due or three hundred pounds, whichever is higher.

Twelve months late: A further penalty of five per cent of the tax due or three hundred pounds, whichever is higher. In serious cases, the penalty can be up to one hundred per cent of the tax due.

Late Payment Penalties

If you do not pay your tax by the thirty-first of January, HMRC charges interest on the outstanding amount from day one. After thirty days, a surcharge of five per cent of the unpaid tax is added. Further five per cent surcharges are added at six months and twelve months.

Errors and Investigations

If HMRC finds errors in your tax return, penalties range from zero (for innocent mistakes that you disclose voluntarily) to one hundred per cent of the unpaid tax (for deliberate and concealed errors). The best protection is accurate records, honest reporting, and professional advice when you are unsure about anything.

VAT — Do You Need to Register?

VAT is separate from self-assessment but closely related. You must register for VAT if your taxable turnover exceeds eighty-five thousand pounds in any twelve-month period. Some tradespeople voluntarily register below this threshold because they can reclaim VAT on their purchases, which can be beneficial if you have high material costs.

VAT registration adds complexity — you need to charge VAT on your invoices, file quarterly VAT returns, and keep more detailed records. But for tradespeople whose turnover approaches or exceeds the threshold, it is a legal requirement. Our guide on VAT registration for tradespeople covers this in detail.

Making Tax Digital

HMRC's Making Tax Digital (MTD) programme is changing how self-employed people report their income. From April 2026, self-employed people with income over fifty thousand pounds must keep digital records using MTD-compatible software and submit quarterly income updates to HMRC. This will extend to those with income over thirty thousand pounds from April 2027.

Under MTD, instead of filing one annual tax return, you submit five updates per year — four quarterly summaries plus a final declaration. The aim is to give HMRC (and you) a more up-to-date picture of your tax position throughout the year.

If you are not already using digital accounting software, you will need to start. HMRC publishes a list of MTD-compatible software on GOV.UK. The most popular options for tradespeople include QuickBooks, Xero, and FreeAgent.

Tax Planning Tips for Tradespeople

Beyond claiming expenses and filing on time, there are several strategies that can reduce your tax burden legally.

Time your purchases. If you need new tools or equipment, buying before the end of the tax year (fifth of April) means you can claim the expense in the current year rather than waiting until next year's return.

Use your pension allowance. Pension contributions reduce your taxable profit. If you contribute to a personal pension, the government adds basic rate tax relief automatically, and you can claim additional relief through self-assessment if you are a higher rate taxpayer.

Consider incorporation. Once your profits consistently exceed fifty thousand pounds, operating through a limited company and paying yourself a combination of salary and dividends can be more tax-efficient than sole trader status. The savings vary depending on your circumstances, so get specific advice from your accountant. Our guide on sole trader vs limited company explains the differences.

Claim capital allowances properly. The Annual Investment Allowance lets you deduct the full cost of qualifying assets (tools, equipment, vehicles) up to one million pounds per year. Make sure you are claiming this rather than spreading the cost over multiple years unnecessarily.

Save regularly. Put twenty-five to thirty per cent of every payment you receive into a separate savings account for tax. This removes the stress of finding a large lump sum in January and ensures the money is there when you need it.

Common Tax Mistakes Tradespeople Make

Not separating business and personal finances. Mixing everything in one bank account makes record keeping a nightmare and increases the risk of missing expenses or including personal costs. Open a dedicated business bank account.

Losing receipts. No receipt means no claim. Photograph every receipt the day you get it. A five-second photo can save you real money at tax time.

Underclaiming expenses. Many tradespeople forget to claim legitimate expenses like phone bills, home office costs, workwear, and training. Review the full list of allowable expenses and make sure you are claiming everything you are entitled to.

Not planning for payment on account. The January shock of paying one hundred and fifty per cent of your normal tax bill catches too many tradespeople. Know it is coming and save accordingly.

Leaving it until January. Filing your return in April or May — as soon as the tax year ends — gives you months to sort out any issues and plan your payment. Leaving it until the last week of January means stress, mistakes, and the risk of penalties.