Registering for Self Assessment: key facts for sole traders and landlords

Each year, hundreds of thousands of people in the UK become a sole-trader or landlord for the first time. You may be one of them and be wondering how you pay tax on your income. The first essential step is to register for Self Assessment, which is the system UK tax authority HMRC uses to collect Income Tax.

What if you’ve registered for Self Assessment before?

• If you’ve registered for Self Assessment previously, you don’t need to register again.
• Instead, you need to reactivate your Self Assessment account by signing in via GOV.UK to access HMRC’s online services. You’ll need your Government Gateway user ID and password.

Who must register for Self Assessment?

You must register for Self Assessment if you need to file a tax return for the first time because you:

• are a sole trader (ie self-employed) and earned more than £1,000 in the tax year before deducting any tax expenses
• are a partner in an ordinary business partnership
• had a total taxable income of more than £100,000 in the tax year
• had to pay the High Income Child Benefit Charge
• need to report taxable tips and commission
• received taxable income from overseas, savings interest, investments and/or dividends or pensions
• received taxable capital gains from sale of an asset.

What about property rental income?

The first £1,000 of income you receive from renting out property is tax-free. This is your Property Allowance. If you earn property rental income of between £1,000 and £2,000 a year, contact HMRC to find out how to report it.

You must report property rental income via a Self Assessment tax return if it’s £2,500 to £9,999 after allowable expenses or £10,000 or more before allowable expenses.

Need to know! Allowable expenses are costs you’ve paid to run your sole trader business or rent out your property that HMRC allows you to deduct from your income before your tax bill is calculated. Claiming allowable expenses reduces your tax bill.  

When must you register for Self Assessment?

• You must register for Self Assessment before 5 October following the end of the tax year (5 April) during which you earned taxable income.
• That then gives you enough time to complete and file a Self Assessment tax return before the online-filing deadline, which is midnight on the 31 January.
• It’s better to register for Self Assessment sooner rather than later, because it will give you more time to complete your first Self Assessment tax return, which may take longer the first time because you lack knowledge/experience.

How to register for Self Assessment

Don’t worry about registering for Self Assessment. Many thousands of people from all walks of life do it every year. It’s quick, relatively painless and free if you do it yourself.

Need to know! To access HMRC’s online services, you’ll need to set up a Government Gateway account via GOV.UK. To create a Government Gateway user ID (up to 12 characters long), you’ll need to give your name, email address, a password and a memorable recovery word. Once you have your user ID, you can register for Self Assessment via your tax account.

• If you’re registering as a sole trader, you’ll need to register for both Self Assessment and to pay National Insurance contributions. After you register, you’ll get your Unique Taxpayer Reference (UTR) by post within 15 working days (21 days if you live abroad). You’ll get your UTR sooner if you use the HMRC app. Your UTR is a ten-digit code that enables HMRC to identify you as a taxpayer.
• If you’re not self-employed, you can also (usually) register for Self Assessment online. You need a Government Gateway user ID and password to register. You can create one when you sign in for the first time. You’ll need to state your full name, postal address (which can be outside of the UK), date of birth, telephone number and UK National Insurance number. You’ll also be asked why you’re registering for Self Assessment. You’ll then get your UTR as above.

Need to know! When registering, you’ll need to have all the necessary information ready, because you cannot save a part-completed form. Important: you should not share your Government Gateway user ID and password with anyone else.

What happens after you register for Self Assessment?

• Once you’ve set up an HMRC online services account, you can sign in for your personal or business tax account (including Self Assessment).
• Each year you must submit a Self Assessment tax return, summarising your taxable income from all sources and tax expenses.
• There is an immediate £100 fine for missing the filing deadline. After filing, HMRC will then tell you how much tax you owe.

Need to know! You must tell HMRC if you stop trading as a sole trader. You can do so via HMRC’s online services (there’s just one form to fill out). You should do this as soon as you cease self-employment. You’ll need to fill out and file a final tax return and pay any tax due.

GoSimpleTax is award-winning software that makes it quick and easy to complete and file your Self Assessment tax return and supplementary pages. It can also prevent you from making basic tax return errors that can later cost you time and money. Thousands of sole traders, landlords and other taxpayers love GoSimpleTax. Start your FREE trial today!

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.