Self-Assessment Tax for UK Tradespeople: What You Need to Know

Self-assessment basics for tradespeople

If you are self-employed — whether as a plumber, electrician, builder, or any other trade — you need to file a self-assessment tax return each year. This guide covers the key things you need to know.

Who needs to file a self-assessment return?

You must register for self-assessment and file a return if any of the following apply:

• You are a sole trader earning more than £1,000 in a tax year
• You are a partner in a business partnership
• You have untaxed income (e.g. rental income alongside your trade)
• You are a subcontractor with CIS deductions to reclaim
• Your income exceeds £150,000 (even if you are also employed)

Most self-employed tradespeople fall into the first category. If you have just started out, you need to register for self-assessment with HMRC by 5 October following the end of the tax year in which you started trading.

Key deadlines

• 5 April — end of the tax year
• 31 October — deadline for paper tax returns
• 31 January — deadline for online tax returns AND payment of tax owed
• 31 July — second payment on account (if applicable)

Missing the 31 January deadline results in an automatic £100 penalty, even if you owe no tax. After three months, daily penalties of £10 per day kick in (up to 90 days). After six months, an additional 5% of the tax due is charged. Full details are on HMRC's penalties page.

How much tax will you owe?

Your tax bill depends on your profit (income minus allowable expenses). Use our self-assessment calculator to get an estimate.

For 2025/26, the income tax bands are:

• Personal allowance: £12,570 (no tax)
• Basic rate: 20% on £12,571 to £50,270
• Higher rate: 40% on £50,271 to £125,140
• Additional rate: 45% on income over £125,140

Your personal allowance is reduced by £1 for every £2 you earn above £100,000. At £125,140, it drops to zero. You can check the latest thresholds on the gov.uk income tax rates page.

National Insurance contributions

Self-employed tradespeople pay two types of NIC:

• Class 2: £3.45 per week (if profits exceed £12,570)
• Class 4: 6% on profits between £12,570 and £50,270, plus 2% on profits above £50,270

Class 2 NICs count towards your state pension entitlement, so even though the amount is small, they are worth paying. Full details are on the HMRC National Insurance page.

Payments on account explained

If your tax bill is over £1,000 and less than 80% of it was collected at source (e.g. through CIS deductions), HMRC will ask you to make payments on account. These are advance payments towards next year's bill, each equal to half of the previous year's tax.

For example, if your 2024/25 tax bill is £6,000, HMRC will ask for two payments on account of £3,000 each:

• First payment: 31 January 2026 (paid alongside the balancing payment for 2024/25)
• Second payment: 31 July 2026

This catches many tradespeople off guard in their second year of trading. Budget for it by setting aside 25-30% of your profits each month. If you work under CIS and have deductions to offset, your payments on account will be lower — use our CIS calculator to track your deductions.

Allowable expenses

You can deduct legitimate business expenses from your income before calculating tax:

• Tools, equipment, and safety gear
• Van/vehicle costs (fuel, insurance, servicing)
• Materials you buy for jobs
• Public liability insurance
• Phone and broadband (business proportion)
• Accountant fees
• Software subscriptions (e.g. InvoiceAdept)
• Protective clothing and workwear

Vehicle expenses: mileage vs actual costs

You have two options for claiming vehicle expenses. You must pick one method and stick with it for that vehicle:

Simplified mileage: Claim 45p per mile for the first 10,000 business miles, then 25p per mile after that. You do not need to track fuel, insurance, or servicing costs — the mileage rate covers everything.

Actual costs: Track all vehicle costs (fuel, insurance, repairs, road tax, finance interest) and claim the business-use percentage. If you use the van 80% for work, claim 80% of all costs.

For most tradespeople who drive a dedicated work van, actual costs tend to give a higher claim. If you use a personal car for site visits, simplified mileage is usually easier. HMRC's guidance on simplified expenses explains both methods.

Capital allowances for tools and equipment

When you buy tools, equipment, or a van for your business, you can usually claim the full cost in the year of purchase through the Annual Investment Allowance (AIA). The current AIA limit is £1,000,000, which is well above what most tradespeople will spend.

Common items covered by capital allowances:

• Power tools and hand tools
• Vans and commercial vehicles
• Ladders, scaffolding, and access equipment
• Computers, tablets, and phones used for work
• Site equipment (generators, compressors, etc.)

You cannot claim for items bought for personal use. If an item is used for both business and personal purposes, claim only the business proportion. See the gov.uk capital allowances guide for full details.

Keeping good records

HMRC requires you to keep records of all income and expenses for at least 5 years. Digital records are now essential — especially with Making Tax Digital requirements coming in from April 2026.

InvoiceAdept automatically tracks every invoice you send and every expense you record, keeping your records digital and export-ready.

At a minimum, you should keep:

• All invoices you send (use our invoice generator to create professional invoices)
• Receipts for every business purchase
• Bank statements showing business transactions
• Mileage logs if you claim vehicle expenses
• CIS payment and deduction statements from contractors

Common self-assessment mistakes tradespeople make

These are the errors that most often trigger HMRC enquiries or cost tradespeople money:

• Not separating business and personal accounts. Open a dedicated business bank account. It makes record-keeping far simpler and keeps HMRC happy.
• Forgetting to claim all expenses. Many tradespeople miss things like phone bills, home office costs (if you do admin from home), or training courses. If it is a genuine business cost, claim it.
• Not saving for the tax bill. Set aside 25-30% of every payment you receive into a separate savings account. When January comes, the money is there.
• Missing the deadline. Even if you cannot pay the full bill, file the return on time to avoid the £100 penalty. You can then set up a Time to Pay arrangement with HMRC.
• Not claiming CIS deductions. If you work under CIS, the tax deducted by your contractor counts towards your tax bill. Make sure you include all CIS deductions on your return — they reduce what you owe.

Making Tax Digital for tradespeople

From April 2026, self-employed tradespeople earning over £50,000 will need to keep digital records and submit quarterly updates to HMRC under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). Those earning over £30,000 will follow from April 2027.

This means you will need compatible software to record income and expenses digitally. InvoiceAdept keeps all your invoicing records in the right format, ready to export or connect to MTD-compatible accounting software. Read the full HMRC MTD software guidance for more details.

Frequently asked questions

Can I file my self-assessment return myself or do I need an accountant?

You can absolutely file it yourself through HMRC's online portal. Many sole trader tradespeople with straightforward income and expenses do their own returns. However, if you have complex affairs — multiple income sources, CIS deductions, or significant capital allowances — an accountant can save you more than they cost by ensuring you claim everything you are entitled to.

What happens if I cannot afford to pay my tax bill?

File your return on time regardless — the late filing penalty applies even if you owe nothing. Then contact HMRC to set up a Time to Pay arrangement. They will typically let you spread the bill over 6-12 months. Call the Self Assessment Payment Helpline on 0300 200 3822 as soon as you know you will struggle to pay.

Do I need to register if I only do the odd job on the side?

If your self-employment income is under £1,000 in the tax year, it is covered by the trading allowance and you do not need to register. Above £1,000, you must register and file a return, even if you also have a full-time employed job.

How do CIS deductions affect my self-assessment?

CIS deductions are advance payments of income tax. When you file your return, you enter the total CIS deducted during the year, and HMRC offsets it against your tax bill. If more was deducted than you owe, you get a refund. Track your deductions carefully using our CIS calculator.

When should I start saving for my tax bill?

From day one. Open a separate savings account and transfer 25-30% of every payment you receive into it. This covers income tax, NICs, and payments on account. Use our self-assessment calculator to estimate your annual liability and adjust your savings rate accordingly.

Estimate your tax bill

Use our free self-assessment calculator to estimate your income tax and NIC for the current tax year. Then try InvoiceAdept free to keep your records organised all year round.