Understanding Tax Return Costs for Sole Traders

If you are a UK sole trader, one of the costs you may need to budget each year is the preparation cost for your Self Assessment tax return. However, tax return costs for sole traders can vary based on whether you complete the tax return yourself, use accounting software, or hire an accountant. 

Understanding the cost of Self Assessment tax return and how you can naturally lower your bill is essential. This guide explains typical sole trader accounting fees in the UK, the latest HMRC rules you should know about, and which expenses may be allowable.  

What Is a Sole Trader Tax Return?

Before diving into the tax return costs for sole traders, let’s understand what a sole trader tax return is. A sole trader tax return, also known as a Self Assessment tax return, is an annual report sent to HMRC to declare business income, claim allowable expenses, and calculate the Income Tax and National Insurance (NI) owed on profits.

If your gross trading income is more than £1,000 in a tax year, you will generally need to register for Self Assessment as a sole trader. However, specific rules and circumstances can affect whether you need to file a return. 

After your registration, you submit your Self Assessment tax returns. When you submit your tax returns, HMRC will assess if you need to pay Income Tax and NICs based on your profits. 

How Much Do Tax Return Costs for Sole Traders?

You must know that in the UK there is no single fixed price for a sole trader tax return. If a sole trader completes their Self Assessment tax return themself using HMRC’s online service, they do not pay an accountant to prepare the return. 

HMRC provides an online filing service for people who are self-employed and need to submit a Self Assessment return. However, if you hire an accountant for your tax return, the price will depend on the services included and the complexity of your tax affairs. 

For instance, an accountant may charge different tax return costs for sole traders based on whether they have simple self-employment income, several sources of income, VAT responsibilities, and other requirements. Therefore, it is better to compare what is included in an accountant’s fee rather than choosing one based on the price alone. 

How Much Does It Cost to Prepare a Sole Trader Tax Return?

HMRC treats accountancy, legal, and other professional fees as allowable business expenses when incurred for business purposes. However, the cost of preparing and submitting a Self Assessment tax return cannot be claimed as an allowable business expense. 

When considering tax return costs for sole traders, it is important to distinguish between fees for personal tax work and fees for business-related accountancy services. 

The accountant’s entire annual bill should not be treated as an allowable expense if it covers both business services and personal tax work. If your accountant provides several services, the treatment may depend on what those services relate to. 

Business-related accountancy services may qualify as allowable expenses. However, preparing and submitting your personal Self Assessment return is considered a personal expense and cannot be deducted. 

How Much Are Sole Trader Accountant Fees in the UK? 

According to current UK market rates, sole trader accountant fees UK can typically range from £150 to £400, plus VAT. However, these rates are not fixed and may vary depending on the accountant, location, and complexity of the tax return. These factors can significantly affect tax return costs for sole traders. 

The accountant fee depends largely on the complexity of your tax affairs, the quality of your records, and the services you require. Usually accountants structure their fees in one of two ways:

Fixed One-Off Fees

Online accounting firms and some high-street firms offer a fixed fee for preparing and submitting a Self Assessment tax return. This option is suitable for straightforward tax affairs, well-organised records and limited additional income or tax considerations. Additionally, it may reduce tax return costs for sole traders if you have a simple tax return and only need annual Self Assessment preparation and filing. 

Monthly Accounting Packages

Some accounting firms offer ongoing monthly packages for sole traders. These can range from around £50 to £120 per month. However, the price varies according to the services included. This option can be more cost-effective if you need year-round bookkeeping, accounting software support, VAT returns, tax advice, and Self Assessment. 

What Affects Sole Trader Accountant Fees?

Self Assessment accountant fees for sole traders mainly depend on three things:

Quality of Your Records

Quality of records can affect tax return costs for sole traders. If there are well-organised records, an accountant will have to spend less time, hence the cost decreases. 

Business Complexity

If you have a simple sole trader setup with one income source, it may cost less. However, if there are multiple income streams, property income, or complex expenses, the fee increases because they take more time to prepare.

Use of Accounting Software

Using software can reduce an accountant’s workload and make bookkeeping easier. With Making Tax Digital (MTD) being introduced from 2026 onwards for higher earners, you may need compatible software, which may add to overall costs.

What Does Making Tax Digital Mean for Sole Traders in 2026/27? 

MTD for Income Tax is introduced in stages. Sole traders and landlords with qualifying income over £50,000 have been required to use MTD from 6 April 2026. If you have qualifying income over £30,000, you will enter the regime from 6 April 2027. However,  the threshold is due to fall to £20,000 from 6 April 2028. Keep in mind that qualifying income is based on gross income from self-employment and property before expenses. 

Can Sole Traders Claim Accountancy Fees as an Expense?

When considering tax return costs for sole traders, it is crucial to know what expenses they can claim. UK sole traders can claim some accountancy fees as a business expense, but not every accounting-related cost qualifies.

What Are Allowable Expenses for Sole Traders? 

You can claim professional fees incurred for business reasons. For example, you can claim costs such as hiring accountants, solicitors, surveyors and architects only for business reasons. Other allowable expenses include:

• Travel and vehicle costs
• Marketing and subscription costs
• Office, property, and equipment costs
• Staff and reselling costs 

However, you cannot claim for the cost of preparing and submitting your Self Assessment tax return. 

What Tax Does a Sole Trader Actually Pay?

As a sole trader, you pay personal Income Tax and NI on your taxable profit. Taxable profit is based on business income after deducting allowable business expenses, subject to the accounting method and relevant tax rules. 

The standard Personal Allowance (2026/27 tax year) is £12,570. The basic Income Tax rate is 20%, the higher rate is 40%, and the additional rate is 45%, with the relevant thresholds applying after allowances. 

When Is a Sole Trader Tax Return Due? 

Now that you have a thorough understanding of tax return costs for sole traders, let’s learn the deadline for your Self Assessment. 

For the 2025/26 tax year, which ran from 6 April 2025 to 5 April 2026, the online Self Assessment deadline is 31 January 2027. Moreover, paper returns are due earlier, by 31 October 2026. Any tax owed is also due by 31 January 2027. Some taxpayers may need to make payments on account on 31 January and 31 July.

Furthermore, if you need to register for Self Assessment because you have tax to pay and did not previously need to file a return, you generally need to notify HMRC by 5 October following the end of the relevant tax year. 

How to Minimise Tax Return Costs For Sole Traders?

If you hire an accountant, you can keep your overall accounting costs under control through these practical ways: 

Keep Records Throughout the Year

Keep organised records of invoices, receipts and bank statements so you do not have to wait until January to find them. Well-organised records can make the preparation process considerably easier.

Separate Business and Personal Transactions

Although a separate business bank account is not mandatory, it is advisable to use one as it can make it easier to identify business income and expenses.

Use Suitable Accounting Software

Use accounting software to maintain records and categorise transactions. If you fall within MTD for Income Tax, you will need to use compatible software in accordance with HMRC’s requirements.

Ask What an Accountant’s Fee Includes

Before hiring an accountant, ask whether the quoted price covers preparation of accounts, Self Assessment tax return, bookkeeping, tax calculations, advice, MTD support, and additional tax returns. 

The Bottom Line

Tax return costs for sole traders vary based on how complex your business is and whether you hire an accountant. Doing your tax return yourself can save money, while an accountant can save time and reduce errors. The best choice depends on your needs and confidence with tax.

Whether you are doing it yourself or hiring an accountant, you need to keep good records and follow HMRC rules on allowable expenses. For complex income, it is recommended to hire an expert.

At AccountingFirms, we help you find the best accountant for your tax returns. Start your search today and find an accountant within just minutes!

Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.