Sole Trader Tax Guide: Your First Year

Your Tax Year

The UK tax year runs from 6 April to 5 April. If you start your business mid-year, your first tax return covers from your start date to 5 April.

What You Owe

As a sole trader, you pay:

Income Tax

On your profit (income minus allowable expenses):

• 0% on the first £12,570 (Personal Allowance)
• 20% on £12,571 to £50,270
• 40% on £50,271 to £125,140
• 45% above £125,140

National Insurance

• Class 2: £3.45 per week (if profits above £6,725)
• Class 4: 6% on profits £12,570-£50,270; 2% above £50,270

Common First-Year Expenses

Claim everything you are entitled to:

• Equipment (laptop, phone, tools)
• Software subscriptions
• Insurance
• Travel and mileage (45p per mile for the first 10,000 miles)
• Home office costs (simplified method: £6 per week if working 25-50 hours at home monthly)
• Marketing (website, business cards)
• Professional development
• Accountancy fees
• Stationery and postage
• Phone (business proportion)

Key Dates

| Date | What Is Due | |------|-------------| | 5 October after your second tax year | Deadline to register for Self Assessment | | 31 January | Online tax return deadline + tax payment | | 31 July | Second payment on account |

The Payments on Account Trap

If your tax bill exceeds £1,000 (after deducting tax collected at source), HMRC sets up payments on account. This means your first January payment includes:

• The full tax for the year just ended
• Plus 50% of next year's estimated tax

This can be a nasty surprise. Set aside money monthly to be ready.

Record Keeping

Keep all receipts, invoices, and bank statements for at least five years after the 31 January deadline. Digital records are best.

Use Accounted from day one — Penny tracks income, categorises expenses, and calculates your tax in real time.

---

Your first tax year sets the tone. Get it right. Sign up for Accounted and let Penny guide you through your first year of self-employment tax.