When do sole traders pay tax? The essential UK deadlines you need to know

Don't get caught out by sole trader tax payment dates

Running your own business comes with a lot of freedom and responsibility.. But the paperwork that comes with it, especially tax, can feel like a heavy anchor dragging you down. When exactly does the HMRC need their share?

Income Tax through Self Assessment for sole traders in the UK is a bit more complex than one simple annual bill. It’s a series of deadlines, all managed through the Self Assessment system, with some pre-payments for the next tax year (Payment on Account). Get these dates wrong, and you risk an automatic £100 penalty.

The short answer? You mostly pay twice a year: 31st January and 31st July.

What is Payment on Account?

Payment on Account (POA) is essentially a prepayment towards your next year's tax bill.

If your tax bill is over £1,000, the HMRC expects you to make two instalment payments towards your tax for the following year. They do this to stop you from being hit with one massive bill, helping to spread out the cost. It’s a way to help you manage your cash flow.

Each payment is usually half of your previous year’s total tax and National Insurance bill.

The two main tax payment dates

The UK tax year runs from April to 5th April the following year. Your Self Assessment tax return and payments are due after that year has ended.

By 31st January, you must:

• File your return: Submit your online Self Assessment tax return for the previous tax year (the one that ended 5th April).

• Pay your bill: Pay any outstanding tax and National Insurance (known as a balancing payment)

• Make your first Payment on Account: For most sole traders, your first advanced payment towards your next tax bill (this is your first Payment on Account

By 31st July you must

• Make your second Payment on Account to prepay your next tax bill if your last tax bill was more than £1,000. This is your final advance payment towards the coming tax year.

Think of it this way:

• 31st January (year two): You pay the final amount you owed for year one, plus your first prepayment (POA) for year two.

• 31st July (year two): You pay your second prepayment (POA) for year two.

• 31st January (year three): You file your final tax return for year two. If your POAs were too low, you make a balancing payment. If they were too high, you get a refund. You then make the first POA for year three.

Staying on top of your cash flow throughout the year is your single best defence against tax-time stress. After all, if your business is running on reliable, predictable payments (like those collected using GoCardless), you’ll always have the capital ready to tackle those inevitable deadlines without breaking a sweat.