Completing your first Self Assessment tax return can feel like a daunting milestone. The forms, the deadlines, and the jargon can be intimidating for any new sole trader. But with a structured approach, the process becomes manageable and clear.
This case study follows “Chloe,” a freelance graphic designer, as she navigates her first tax return for the 2025/26 tax year. We will walk through each step, from registering with HMRC to calculating her final tax bill, providing a practical blueprint for any sole trader facing their first filing.
The Client: Meet Chloe, a Freelance Designer
Chloe started her freelance graphic design business in May 2025. She works from a home office and has several clients. She knows she needs to file a tax return but is unsure about the deadlines, what expenses she can claim, and how to calculate what she owes.
- Business: Sole Trader, Graphic Design
- Started Trading: May 2025 (during the 2025/26 tax year)
- Key Challenge: Completing her first Self Assessment return correctly and understanding her obligations.
Step 1: Does Chloe Need to File a Tax Return?
The first question every new sole trader must ask is whether they need to file at all. For the 2025/26 tax year, you must register for Self Assessment if your gross income from self-employment is over the £1,000 trading allowance.
Chloe’s income for the year was £45,000, well above the threshold. Therefore, she has a legal duty to register and file a tax return.
Step 2: Registering for Self Assessment
Before filing, Chloe must register as a sole trader with HMRC. This is a critical step with a strict deadline.
- Action: Chloe registers for Self Assessment online via the Government Gateway.
- Deadline: The deadline for registering is 5 October 2026, which is 5 October after the end of the tax year in which she started trading. Missing this deadline can result in penalties.
- Outcome: After registering, HMRC sends Chloe a letter containing her 10-digit Unique Taxpayer Reference (UTR). She needs this UTR to file her return.
Step 3: Gathering Records – Income and Allowable Expenses
The foundation of any accurate tax return is organised record-keeping. As a sole trader, Chloe must keep records of all her business income and expenses.
Chloe’s Income:
- Total invoices issued to clients: £45,000
- Evidence: Copies of all invoices, business bank statements showing payments received.
Chloe’s Allowable Expenses:
To reduce her taxable profit, Chloe can deduct allowable business expenses. These must be incurred “wholly and exclusively” for the purposes of her trade.
| Expense Category |
Chloe’s Allowable Costs |
Notes |
| Software Subscriptions |
£650 |
Adobe Creative Cloud, accounting software, project management tools. |
| Office Costs |
£312 |
Simplified flat rate for “use of home” expenses (£26 per month for 101+ hours). |
| Marketing |
£1,200 |
Website hosting, business cards, online advertising. |
| Professional Fees |
£400 |
Professional body membership, accountant’s fees. |
| Hardware |
£1,500 |
New laptop (claimed through capital allowances, not as a direct expense). |
| Travel |
£350 |
Train tickets to meet clients. |
| Total Expenses |
£4,412 |
This is the total of day-to-day revenue expenses. |
Keeping detailed records is a legal requirement. These records can be in any format, but they must be sufficient to calculate the tax due correctly.
Step 4: The Calculation – Completing the Tax Return
With her records organised, Chloe can now calculate her profit and tax liability. She completes the self-employment pages (SA103) of her tax return.
| Calculation Step |
Chloe’s Figures |
| Total Income (Turnover) |
£45,000 |
| Less: Total Allowable Expenses |
(£4,412) |
| Taxable Profit |
£40,588 |
Based on this profit, Chloe’s tax and National Insurance liability for 2025/26 is calculated. This is her ‘self-assessment’.
Step 5: Filing, Paying, and Looking Ahead
Filing and Paying:
- Deadline: Chloe must file her return and pay the tax she owes by 31 January 2027.
- Method: She files online using her UTR and Government Gateway account.
Looking Ahead: Making Tax Digital (MTD)
Chloe’s turnover of £45,000 is below the initial MTD for Income Tax threshold of £50,000 which began on 6 April 2026. However, it is above the next threshold of £30,000, which starts on 6 April 2027.
This means that from April 2027, Chloe will need to:
- Keep digital records of her income and expenses using MTD-compatible software.
- Send quarterly updates of her income and expenses to HMRC directly from her software.
- Submit a final tax declaration for the year through her software.
While she can still use spreadsheets, she will need ‘bridging software’ to connect them to HMRC’s systems.
Key Takeaways from a Sole Trader’s First Tax Return
Chloe’s journey highlights the essential steps for any new sole trader:
- Check if you need to file: If your gross income exceeds £1,000, you must register.
- Register on time: Do not miss the 5 October deadline.
- Keep meticulous records: This is your evidence for all income and expense claims.
- Understand allowable expenses: Only claim for costs that are wholly and exclusively for your business.
- Meet the deadlines: File and pay by 31 January.
- Prepare for digital: Be aware of the upcoming Making Tax Digital requirements and choose compatible software.
Filing a first tax return is a learning process. By staying organised and understanding the rules, any sole trader can confidently manage their tax obligations.
For detailed guidance, it is advisable to review HMRC’s Business Income Manual and the latest information on Self Assessment and Making Tax Digital on GOV.UK.
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