Accountants for sole traders

For most sole traders, an accountant's job comes down to three things: working out the profit, with a choice each year between claiming actual expenses or the trading allowance; putting that profit on your self assessment return with any other income; and, increasingly, keeping you in step with Making Tax Digital, which adds quarterly updates for people above the income threshold.

Around that core, a good accountant will tell you which costs HMRC treats as business expenses, how to split costs that are partly personal, such as a phone or a van, and roughly how big your tax bill is likely to be.

The term sole trader covers a huge range of people, for example:

• a mobile hairdresser or personal trainer in their first year
• a plumber or electrician working on their own account
• an online seller making a few thousand pounds a year
• an employee with a side business at weekends

If you are wondering whether to become a limited company, see our page on accountants for small businesses.

The trading allowance is a tax exemption of up to £1,000 a year. If your trading income is £1,000 or less, you may not need to tell HMRC at all. If it is over £1,000, you must register for Self Assessment, and you can then choose to deduct up to £1,000 instead of your actual expenses, which can be simpler for a business with very low costs.

You must tell HMRC by 5 October if you need to complete a tax return for the previous year. For the 2025 to 2026 tax year that date was 5 October 2026, and registering after it could result in a penalty.

The Budget on 28 October 2026 announced that the trading allowance will rise from £1,000 to £3,000 from 6 April 2027, for 2027 to 2028 onwards, with the Self Assessment reporting threshold for trading income rising to £3,000 too. This is announced and not yet law: legislation is due in the Finance Bill 2026-27, so check GOV.UK before relying on it.

Sole traders pay income tax on their profits at the same rates as everyone else, after the £12,570 personal allowance. In England, Wales and Northern Ireland the basic rate is 20%, the higher rate 40% and the additional rate 45%. Scottish taxpayers pay different rates and bands.

On top of income tax comes self-employed National Insurance. If your profits are £7,105 or more, the small profits threshold, Class 2 contributions are treated as having been paid, so there is nothing to pay but your National Insurance record is protected. Below it, you can choose to pay voluntary Class 2 at £3.65 a week.

Making Tax Digital for Income Tax is the biggest change sole traders face. The test uses annual gross income from self-employment and property, before any allowances or expenses are deducted.

• from 6 April 2026: more than £50,000, based on the 2024/25 tax return
• from 6 April 2027: more than £30,000, based on the 2025/26 tax return
• from 6 April 2028: more than £20,000, based on the 2026/27 tax return

If you are in, you keep digital records and send quarterly updates through compatible software, then submit your return from that software. There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year. Our Making Tax Digital page covers the deadlines and exemptions in more detail.

Whether or not you are in MTD, you must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.

Plenty of sole traders with simple costs file their own return using HMRC's online service or software. People tend to look for an accountant when profits rise into the higher rate band, when they cross a Making Tax Digital threshold, when they register for VAT, or when they have several sources of income. If an accountant files for you, you are still legally responsible for your own tax and must check the return before it is submitted.

• Does the fee cover the accounts, the tax return and, if you need them, Making Tax Digital quarterly updates?
• Which software do they use, and will they work with what you already have?
• Can you have the fee and the scope of work in writing before they start?
• Are they registered with HMRC or a professional body for anti-money laundering supervision? Every accountancy service provider must be.
• Who will you deal with day to day, and how do you send them receipts and records?

Sole trader fees are often charged monthly or as one yearly fee. For example, The Accountancy Partnership lists sole trader plans from £24.50 per month, with Self Assessment included and all prices excluding VAT. Local firms set their own fees; our sole trader accountant fees guide explains the wider picture.