Do I Need to Do a Self Assessment as a Small Business Owner?

Many small business owners must file a Self Assessment each year. Learn who needs to register, what information you need, and how to stay compliant with HMRC.

Introduction

If you run a small business in the UK, understanding your tax responsibilities is vital. One of the most common questions business owners ask is whether they need to complete a Self Assessment tax return. The answer depends on how your business is structured and how you earn your income.

Filing a Self Assessment ensures you declare your income, pay the right amount of tax, and stay compliant with HMRC. This article explains when small business owners need to file a Self Assessment, how it works, and what happens if you do not complete one.

What Is a Self Assessment?

A Self Assessment tax return is HMRC’s system for collecting Income Tax from individuals and businesses whose tax is not automatically deducted at source.

If you are self-employed or earn untaxed income, you must complete a Self Assessment to report:

  • Your business income and expenses.

  • Any other sources of income (such as rent, dividends, or savings interest).

  • The tax you owe for the year.

Most people file online using HMRC’s digital service, though paper returns are still accepted. The deadline for filing online is 31 January following the end of the tax year (which runs from 6 April to 5 April).

Who Needs to Do a Self Assessment?

Not every business owner needs to file a Self Assessment, but most small business structures fall under HMRC’s rules for self-employed or company directors.

1. Sole Traders

If you are a sole trader, you are self-employed, which means you must file a Self Assessment tax return each year.

You need to register for Self Assessment if:

  • You earned more than £1,000 from self-employment in a tax year.

  • You want to claim tax relief on business expenses, even if you earned less than £1,000.

As a sole trader, you pay:

  • Income Tax on your business profits.

  • Class 2 and Class 4 National Insurance based on your earnings.

Your tax bill is based on your total profits after deducting allowable expenses such as equipment, travel, and office costs.

2. Partnership Owners

If you run a business as a partnership, both the partnership and each individual partner must file a tax return.

  • The partnership files a single tax return to show the overall profit.

  • Each partner files their own Self Assessment return showing their share of the profits.

Partnership members are taxed on their share of profits, not on what they withdraw from the business.

3. Limited Company Directors

If you are a director of a limited company, the company itself pays Corporation Tax on its profits, but you may also need to file a personal Self Assessment return.

You must complete a Self Assessment if you:

  • Receive income from the company, such as dividends or a director’s salary.

  • Have other personal income outside the company, such as rent or investments.

  • Need to claim tax relief or report benefits in kind (for example, company cars).

Even if you take a small salary and most of your income comes from dividends, you are responsible for declaring this on your personal tax return.

4. Landlords or Side Business Owners

Many small business owners also earn additional income from property or side projects. You must file a Self Assessment if you:

  • Earn more than £1,000 from a side business or gig work.

  • Receive rental income exceeding £1,000 per year.

  • Earn money from online sales or freelance work outside your main job.

Who Does Not Need to File a Self Assessment?

You do not need to file a Self Assessment if:

  • All your income is from employment, and your employer deducts tax through PAYE.

  • You earn less than £1,000 from self-employment (under the trading allowance) and do not want to claim expenses.

  • You have no untaxed income or other sources of income to report.

If HMRC has not sent you a notice to file a tax return and you meet none of the criteria above, you are not required to complete one.

How to Register for Self Assessment

If you are self-employed or need to file a Self Assessment for another reason, you must register with HMRC before submitting your first return.

  1. Register online: Visit the HMRC website and create a Government Gateway account.

  2. Provide business details: Include your name, address, National Insurance number, and business type.

  3. Receive your UTR (Unique Taxpayer Reference): HMRC will post your UTR within 10 working days.

  4. Set up online access: You can then file returns and manage your account online.

You should register by 5 October following the end of your first tax year in business.

What Information You Need for a Self Assessment

To complete your Self Assessment accurately, you will need:

  • Records of all business income and expenses.

  • Bank statements and invoices.

  • Proof of any other income (e.g. property rent, dividends).

  • Details of pension contributions or charitable donations.

  • Copies of previous tax returns if applicable.

Keeping organised records throughout the year makes the process much easier and helps you claim all eligible deductions.

Deadlines for Self Assessment

Key Self Assessment deadlines:

  • 5 October: Register for Self Assessment (if self-employed or newly liable).

  • 31 October: Deadline for paper tax returns.

  • 31 January: Deadline for online tax returns and tax payment.

You may also need to make payments on account, which are advance payments toward next year’s tax bill. These are due on 31 January and 31 July.

What Happens If You Do Not File

If you fail to file your Self Assessment by the deadline, HMRC can issue penalties:

  • 1 day late: £100 fixed penalty (even if you owe no tax).

  • 3 months late: £10 per day up to £900.

  • 6 months late: 5% of the tax due or £300 (whichever is greater).

  • 12 months late: Additional 5% or £300.

Interest is also charged on late payments, so it is important to submit and pay on time.

The Role of an Accountant

A professional accountant can make the Self Assessment process straightforward by:

  • Registering you with HMRC and setting up your account.

  • Preparing accurate financial records.

  • Identifying allowable business expenses.

  • Calculating your tax liability and submitting your return on time.

  • Advising on tax efficiency and record keeping for the following year.

For busy small business owners, having an accountant ensures peace of mind and reduces the risk of costly mistakes.

Example Scenario

Lucy runs a small catering business as a sole trader and also earns some extra income renting out a holiday flat. Her total earnings exceed £1,000 from self-employment, so she must register for Self Assessment. Her accountant helps her file the return, claim expenses for equipment and travel, and include her rental income.

After all deductions, her tax bill is lower than expected, and her accountant sets up a plan for saving toward next year’s payment on account.

Conclusion

As a small business owner, you usually need to complete a Self Assessment tax return if you are self-employed, part of a partnership, or a company director receiving income outside PAYE. Filing on time ensures you stay compliant, avoid penalties, and manage your finances effectively.

Working with an accountant can make the process simpler, helping you maximise your deductions and focus on growing your business rather than worrying about tax paperwork.