Sole traders don't file accounts with Companies House, but you still need accurate end of year figures to complete your Self Assessment tax return. Here's what to prepare, which deadlines apply and how to avoid a last-minute scramble.
If you're self-employed, "end of year accounts" can sound like something only limited companies deal with. Sole traders don't file accounts with Companies House, but you do need a clear record of your income, costs and profit for the year, because that is what your Self Assessment tax return is built from. Getting those figures right, and in good time, is the difference between a calm January and a stressful one. This guide is for sole traders in Bristol and across the UK.
Do sole traders need end of year accounts?
Yes, in the sense that matters: you must keep records and report your business income and expenses to HMRC every year. You don't have to produce a formal, published set of accounts like a limited company does, but most sole traders (or their accountant) summarise the year in a simple profit and loss statement. It shows what you earned, what you spent and what profit is left to tax.
Many sole traders also want a balance sheet-style picture of what the business owns and owes, particularly if they are applying for a mortgage, a loan or a lease, where lenders often ask for accounts or an accountant's reference.
Which year are you reporting on?
Your tax year runs from 6 April to 5 April. Since the 2024/25 tax year, sole traders are taxed on the profits of the tax year itself, so many find it simplest to line their accounting year up with it. If you have a different year end, such as 31 March, your accountant can show you how your figures are reported.
What to gather at the end of the year
- Business bank statements for the whole year (and credit card statements, if you use one for the business)
- Sales invoices, and a list of anything customers still owe you
- Receipts and supplier invoices for business costs
- Mileage records, if you claim for business journeys
- Details of equipment or vehicles you bought or sold
- Any money you put into, or took out of, the business for personal use
- Records of anything you've paid staff or subcontractors
A separate business bank account makes this far easier, because personal spending is already out of the picture. Our checklist goes into more detail on what to tidy up before you hand things over.
Cash basis or traditional accounting?
Cash basis is the standard way for sole traders and most partnerships to record income and expenses: you record income when you receive the money and costs when you pay the bill. It's usually simpler. Traditional accounting records income and expenses when they are earned or incurred, whether or not the money has moved. You can use traditional accounting instead if it suits your business better, and some businesses can't use cash basis at all, so check your position with your accountant.
Allowable expenses and the trading allowance
You only pay tax on your profit, so claiming every legitimate business cost matters. Common examples include materials and stock, software subscriptions, insurance, professional fees and a share of the running costs of working from home. The costs must be wholly and exclusively for the business, so keep a receipt and a note of why each one was needed.
If your self-employment income is low, the £1,000 trading allowance can be used instead of claiming actual expenses. Which is better depends on your costs, and you can't claim both, so it's worth comparing the two.
Key deadlines for sole traders
- 5 October: the deadline to register for Self Assessment if you're new to it and need to file for the previous tax year
- 31 October: the deadline for paper tax returns
- 31 January: the deadline for online tax returns, and for paying the tax you owe
- 31 July: the second payment on account, if you pay in instalments
For the 2025/26 tax year, the online Self Assessment filing and payment deadline is 31 January 2027. Don't wait until the last week: the more notice your accountant has, the smoother the process.
What happens if you're late?
HMRC charges a £100 penalty if your return is late, even if you owe no tax. After three months, further daily penalties of £10 a day can build up to £900, and there are additional penalties of 5% of the tax due (or £300, if greater) at six and twelve months. Late payment attracts its own penalties and interest on top.
How long to keep your records
Keep your business records for at least five years after the 31 January deadline for the tax year they relate to. So records for the 2025/26 tax year need to be kept until at least 31 January 2032.
Making Tax Digital is changing the picture
From April 2026, Making Tax Digital for Income Tax is being phased in for sole traders and landlords, starting with those whose qualifying income is over £50,000, then £30,000 from April 2027 and £20,000 from April 2028. If it applies to you, you'll keep digital records and send quarterly updates using compatible software. Our guide explains who is affected and what to do.
Is it time to stop doing it yourself?
Plenty of sole traders handle their own books and tax return without difficulty. If you're unsure what you can claim, you're regularly behind on your records, or you're thinking about whether a limited company would suit you better, an accountant can usually save more than they cost. If you're weighing that decision, see our comparison of the two structures.
Sole trader accounts from LN Accountants
Our Sole Trader plan starts from £45 a month (exc VAT) and includes your annual Self Assessment tax return, year-end accounts preparation, bookkeeping software and quarterly check-ins, all for a fixed monthly fee. See our pricing, or get in touch to talk through your situation.
Frequently asked questions
Do sole traders have to file accounts?
Sole traders don't file accounts with Companies House. You do need to keep records and report your income and expenses on your Self Assessment tax return each year.
When is the deadline for sole trader accounts?
There is no separate accounts deadline. The figures go into your Self Assessment tax return, which must be filed online by 31 January after the end of the tax year, and any tax paid by the same date.
What is the difference between cash basis and traditional accounting?
Cash basis records income and costs when money is received or paid. Traditional accounting records them when they are earned or incurred, whether or not money has changed hands. Cash basis is the standard for most sole traders, but you can choose traditional accounting.
How long should a sole trader keep records?
At least five years after the 31 January submission deadline for the relevant tax year.
Do I need an accountant as a sole trader?
It isn't a legal requirement. Many sole traders use one to make sure they claim every allowable expense, file on time and avoid penalties.
