accountants for sole traders

You are not legally required to use an accountant as a sole trader, but the vast majority of self-employed individuals choose to do so. A specialist sole trader accountant ensures your Self-Assessment return is accurate, identifies every allowable expense, helps you avoid HMRC penalties, and frees up your time to focus on your business. For most sole traders, the tax savings and time saved significantly outweigh the accountancy fee.

Sole trader accountant fees in London vary depending on the firm and the services you require. AccFirm charges fixed monthly fees for all sole trader clients with no hidden costs and no hourly rates. All fees are agreed in writing before any work begins. Contact us for a free, no-obligation quote tailored to your specific situation and service requirements.

You must register with HMRC as a sole trader by 5 October in your second year of trading. For example, if you began trading at any point between 6 April 2024 and 5 April 2025, you must register by 5 October 2025. Once registered, HMRC will issue your Unique Taxpayer Reference (UTR) and create your Self-Assessment account. AccFirm manages the full HMRC registration process for new sole trader clients.

The online Self-Assessment filing deadline is 31 January each year, covering income earned in the previous tax year (6 April to 5 April). Any Income Tax and Class 4 National Insurance owed must also be paid by 31 January. If HMRC requires advance payments on account, the second payment on account is due by 31 July. AccFirm tracks every deadline for our clients and submits all returns well ahead of the due date.

Sole traders can claim any expense that is wholly and exclusively incurred for business purposes. Common allowable expenses include business mileage (45p per mile for the first 10,000 miles), use of home as office, equipment and technology, professional subscriptions, accountancy fees, marketing and advertising, and training relevant to your trade. AccFirm reviews all client expenses to ensure nothing allowable is overlooked reducing your tax bill as much as legally possible.

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is being introduced from April 2026. Sole traders with income above £50,000 will be required to maintain digital financial records and submit quarterly updates to HMRC using MTD-compatible software, in addition to their annual Self-Assessment return. Further thresholds will follow for lower income levels. AccFirm ensures all sole trader clients are fully prepared and compliant with MTD for ITSA requirements using Xero, QuickBooks, or FreeAgent.

There is no single right answer it depends on your profit level, your long-term business plans, and how much compliance you are willing to manage. Incorporation typically becomes financially beneficial when annual profits consistently exceed approximately £30,000 to £35,000, as the combination of a modest salary and dividends drawn from a limited company can result in less Income Tax and NIC than the equivalent sole trader tax position. AccFirm provides a free, personalised sole trader vs limited company comparison for every client, so you can make an informed decision based on your actual numbers.

Payments on account are advance payments towards the following year’s tax bill, required by HMRC when your Self-Assessment tax liability exceeds £1,000. They are split into two equal instalments: the first due by 31 January and the second by 31 July. In your second year of trading, your January payment will include both the balancing payment for the previous year and the first payment on account for the current year which can be a significant sum. AccFirm prepares clients for payments on account well in advance, advising on the amounts due and helping them set aside funds appropriately throughout the year.