Do sole traders need to submit accounts as well as a tax return?

Understanding what a “sole trader” must actually submit

If you trade as a sole trader, you and your business are the same legal person. That single fact drives most of the paperwork rules. Companies have separate legal identity, so they prepare and file “statutory accounts” to Companies House and submit a corporation tax return to HMRC. Sole traders don’t have that split. Instead, you report the business results as part of your personal tax position.

This is why the question “Do sole traders need to submit accounts as well as a tax return?” often causes confusion. People hear the word “accounts” and think of formal company accounts with directors’ reports, balance sheets in a prescribed format, and filing to a public register. For most sole traders, that’s not what’s required. However, that doesn’t mean you can ignore accounts entirely. You may not have to file a set of statutory accounts, but you do need accounting records and you do need to turn those records into figures that go onto your tax return. In practice, you are preparing accounts even if you never call them that.

Short answer: usually no “filed accounts”, but you must keep records and report figures

In most situations, a sole trader does not submit separate accounts in the way a limited company does. What you submit is a Self Assessment tax return, which includes business income and expenses (often via the self-employment pages). Those pages effectively summarise your accounts for the tax year.

That said, there are three important caveats:

First, you must keep proper business records. HMRC can ask to see them, and poor record-keeping can lead to penalties, delays, and stress.

Second, you may need to provide accounts to other parties, even if you don’t “submit” them to HMRC. Banks, mortgage providers, landlords, investors, local authorities, grant providers, and sometimes clients may request profit and loss statements, balance sheets, or an accountant’s confirmation.

Third, your circumstances can trigger more complex reporting, such as VAT returns, Construction Industry Scheme obligations, payroll submissions if you employ staff, or digital record-keeping rules depending on the tax and compliance environment you operate in.

What counts as “accounts” for a sole trader?

In everyday language, “accounts” can mean anything from a spreadsheet showing what you earned and spent to a professionally prepared set of financial statements. For a sole trader, accounts typically mean a summary of trading results over a period. The most common elements are:

A profit and loss statement, showing income minus allowable expenses to arrive at taxable profit. This is the core of what a sole trader needs for their tax return.

A balance sheet, listing assets (like equipment, stock, and money owed to you) and liabilities (like loans, credit card balances, tax owed, and supplier bills). Many small sole traders don’t prepare a formal balance sheet for tax filing purposes, but it can still be useful for understanding the business and may be required by lenders.

Supporting schedules and records, such as lists of invoices issued, receipts, mileage logs, stock records, capital expenditure lists, and evidence for home working or use of personal assets in the business.

So when someone asks whether you “need to submit accounts”, it helps to ask what kind they mean. You generally don’t file statutory accounts, but you do need business figures prepared from your records, and you may have to provide accounts in practice to third parties.

What you submit to HMRC as a sole trader

Most sole traders deal with HMRC through Self Assessment. Your Self Assessment tax return is your main annual submission. The return includes your personal income and, if you’re self-employed, a section where you declare business turnover, expenses, and profit for the tax year.

Depending on your turnover and how you choose to report, you may use a simplified method (sometimes called “cash basis”) or an “accruals” method. The method affects how you recognise income and expenses. Under a cash approach, you typically record income when you receive it and expenses when you pay them. Under an accruals approach, you recognise income when it’s earned and expenses when they’re incurred, which can involve debtors, creditors, and stock adjustments.

For many sole traders, completing the business pages of the tax return feels like “just filling in boxes”. But those boxes are effectively a condensed set of accounts: total sales, cost of goods, wages, rent, travel, advertising, professional fees, and other categories, leading to your net profit. HMRC expects you to be able to show how you calculated each figure.

Do you need to send HMRC your profit and loss statement?

In routine Self Assessment filing, you normally do not attach a profit and loss statement and you do not send a balance sheet as a separate document. You enter summary figures on the return. HMRC can ask questions later, and if they open an enquiry, they may request to see underlying accounts and evidence.

Some sole traders choose to prepare full accounts anyway, either themselves or through an accountant, because it makes the tax return more accurate and defensible. It can also help with business decision-making, like budgeting, pricing, and monitoring margins.

Why record-keeping matters even if you don’t submit “accounts”

Good records are not just about compliance. They are also about control. If you know what you earn, what you spend, and what you owe, you can run the business with far less uncertainty. In the tax context, good records are your protection. If HMRC challenges a deduction or questions your turnover, your records are what back up your position.

Common records a sole trader should keep include sales invoices, till receipts, bank statements, supplier invoices, expense receipts, contracts, mileage logs, and evidence supporting any apportionment (for example, how you calculated business use of home).

Even if you use an app or software, you should still maintain a clear system: a consistent category structure, a way to capture receipts promptly, and a process to reconcile bank transactions. Reconciliation is particularly important because it helps you confirm that what’s in your accounting records matches what actually moved through your accounts.

Business bank accounts and the “separate money” problem

Sole traders are not legally required to have a separate business bank account in the same way that companies are, but it is often one of the simplest upgrades you can make to your record-keeping. Mixing personal and business transactions makes your bookkeeping messy, increases the chance of errors, and can make any enquiry far more time-consuming.

When personal and business spending are combined, you also risk missing legitimate expenses or accidentally claiming personal costs. If you are ever asked to justify figures, a clean business account creates a clear audit trail and reduces anxiety.

Accounts vs tax return: the difference in purpose

It helps to separate the concept of “accounts” from “tax”. Accounts are about portraying the performance and position of the business. Tax calculations are about applying tax law to determine what’s taxable and what reliefs apply. Often the taxable profit starts with accounting profit and then adjusts for tax-specific rules. That adjustment process is another reason many sole traders prepare accounts even if they don’t file them anywhere.

For example, some expenses that feel business-related may not be allowable for tax, or they may be only partly allowable. Conversely, some tax reliefs apply to capital assets through specific rules rather than being treated like a normal expense. These differences can make it risky to “guess” the numbers on a tax return without structured accounts or at least a careful bookkeeping review.

When you might need to produce formal accounts even as a sole trader

Even if HMRC does not require you to submit accounts as a separate document, real life often does. Here are common scenarios where a sole trader ends up preparing or commissioning formal accounts:

Applying for a mortgage or remortgage. Many lenders request two or three years of accounts or a combination of tax calculations, tax year overviews, and profit summaries. They may prefer accounts prepared or signed off by a qualified accountant.

Seeking a business loan or overdraft. Banks often ask for up-to-date management accounts, projections, and a recent balance sheet to assess affordability and risk.

Renting commercial property or negotiating leases. Landlords may ask for proof of trading stability or affordability, which can include accounts.

Bidding for contracts. Some clients, especially in public sector or larger procurement processes, ask for financial information as part of due diligence.

Insurance and certain regulated activities. Some insurers or regulators may request turnover and profit information supported by accounts.

Grant applications and support schemes. Funding bodies often want evidence of revenue, costs, and business viability.

In these cases, it’s not that you must “submit accounts” to HMRC, but you may need to prepare them for external stakeholders. Keeping accurate bookkeeping throughout the year makes producing these documents much easier.

Cash basis and accruals: how “accounting” creeps in anyway

Many sole traders use simple cash-based bookkeeping because it aligns with the money they see coming in and going out. This can reduce complexity and make it easier to understand, especially for microbusinesses and freelancers. But even a cash approach requires you to apply rules consistently and keep records of what the payments relate to.

For businesses with stock, credit terms, deposits, prepayments, or significant invoices unpaid at year-end, an accruals approach may provide a more accurate picture. It can also matter for profitability analysis. A business that looks healthy in a month where a big invoice was paid might actually be struggling when you consider the costs incurred to earn that invoice.

Whether you’re using cash or accruals, you still need to translate raw transactions into categories and totals. That categorisation is the essence of preparing accounts.

Allowable expenses and why an “accounts mindset” prevents problems

A tax return asks for totals, not for every receipt. That makes it tempting to estimate. But estimations can drift quickly, and small errors across categories can become significant. Adopting an accounts mindset means you capture transactions properly and apply consistent rules.

Consider typical categories and tricky areas:

Travel and subsistence. Business travel is generally different from ordinary commuting, and meals can be complex depending on the circumstances. Clear records help support what you claim.

Use of home as an office. Many sole traders claim part of household costs. You need a reasonable method, such as time-based or room-based apportionment, and you should keep evidence of your calculation.

Phone and internet. If you use personal contracts, you often need to apportion the business element.

Equipment and tools. Some items may be treated as capital rather than a day-to-day expense, which affects how relief is given.

Vehicle costs. You may claim mileage using simplified rates or claim a portion of actual running costs. Either way, logs and consistency matter.

Professional fees. Accountancy, legal costs, and subscriptions can be allowable, but some items may be personal or capital in nature.

These aren’t just technicalities. They affect your taxable profit, which affects income tax and national insurance contributions. Preparing accounts (even informally) helps you treat these items correctly.

What HMRC expects you to keep, and why “no accounts submission” isn’t a free pass

Even though you typically submit only summary figures on a tax return, HMRC expects that those figures are supported. If your return is questioned, you should be able to provide evidence and explain how you arrived at the numbers.

A common misconception is that if you don’t have to file accounts, you don’t need to keep detailed records. In reality, the tax return is a declaration, and you are responsible for ensuring it is correct. Record-keeping is the foundation of that responsibility.

Think of it like this: the tax return is the end product. Accounts and records are the working papers behind it. You may not send the working papers every time, but you still need them.

Do you need an accountant to prepare accounts as a sole trader?

Not necessarily. Many sole traders do their own bookkeeping and tax returns, especially in the early stages. If your income and expenses are straightforward, and you are comfortable with the process, you may be able to handle it yourself using spreadsheets or accounting software.

However, an accountant can be valuable in several situations:

If your turnover is growing and you need better reporting and forecasting.

If you have multiple income streams, subcontractors, overseas clients, or complex expenses.

If you’re unsure about the tax treatment of equipment, vehicles, or home working.

If you are VAT registered or approaching VAT thresholds and need to choose the right scheme.

If you want proactive tax planning, such as understanding when it might be beneficial to incorporate as a limited company or how to structure pension contributions.

If you need accounts for a lender, mortgage application, or contract bidding.

Even if you don’t hire an accountant for everything, many sole traders use an accountant for a year or two to set up a good system and then continue with a clearer understanding of what’s required.

How Making Tax Digital changes the feel of “submitting accounts”

In the UK, the long-term direction of tax administration is more digital and more frequent reporting. This can blur the line between “accounts” and “tax filings” because the data you maintain in your records becomes more directly linked to what you submit. For some sole traders, this makes it feel like they are submitting accounts, even if the legal requirement remains a tax return and related submissions.

What matters practically is that digital record-keeping systems make it easier to compile accurate totals, reconcile transactions, and produce reports quickly. They also reduce the end-of-year scramble. If you are keeping records digitally throughout the year, producing your annual figures becomes a much smaller task.

What about VAT returns, payroll, and other submissions?

The phrase “accounts as well as a tax return” can also arise because people are juggling multiple types of reporting. A sole trader may need to submit:

VAT returns (usually quarterly) if VAT registered.

Real Time Information submissions to HMRC if they run payroll for employees.

Construction Industry Scheme returns if applicable in the construction sector.

Student loan information is not a separate submission, but it can affect what you pay through Self Assessment.

These are not “accounts” in the statutory sense, but they are regular compliance tasks that rely on accurate accounting records. The more obligations you have, the more valuable structured bookkeeping becomes.

Year-end process: turning records into tax return figures

Whether you do it yourself or use an accountant, there is usually a year-end workflow for sole traders:

Gather income records and ensure all sales are captured. For some businesses this is invoices issued; for others it may be platform reports, payment processor summaries, or till records.

Gather expense records, ensure receipts are captured, and confirm business purpose.

Reconcile bank accounts to verify completeness and identify missing items.

Review and categorise expenses correctly, applying any apportionment for mixed-use costs.

Identify capital items and apply the appropriate treatment rather than treating everything as a day-to-day expense.

Check for any unusual fluctuations compared to prior years, which can help catch errors and also prepare you for questions from lenders or tax authorities.

Compile totals and complete the Self Assessment return.

Keep the final reports and backups of your records.

This workflow is essentially the preparation of accounts, even if you never produce a bound set of statements. It’s a disciplined way to ensure the numbers on your tax return are accurate and supportable.

What “accounts” might look like in a simple sole trader business

To make this more concrete, imagine a freelance graphic designer. Over the tax year, they issue invoices to clients, receive payments through a bank account, and incur expenses such as software subscriptions, a laptop, broadband, marketing, and occasional travel to meetings.

At year-end, they total the invoices paid (or invoices issued, depending on method), deduct allowable expenses, and arrive at a profit figure. They then enter turnover and expense totals on the tax return. That is effectively the profit and loss account in summary form.

If they apply for a mortgage, the lender may ask for accounts for the last two years. The designer can produce a profit and loss report from their software, or ask an accountant to prepare accounts in a standard format. The underlying data is the same; the format and level of assurance differ.

What “accounts” might look like in a more complex sole trader business

Now consider a sole trader running a small e-commerce shop. They have stock purchases, shipping costs, payment processor fees, returns, and seasonal fluctuations. Their bank account has dozens or hundreds of transactions each month. They may sell through multiple marketplaces and their own website.

Here, producing reliable figures is harder without robust bookkeeping. They may need to track stock levels and cost of goods sold, allocate refunds correctly, and separate shipping income from sales. In this context, preparing accounts is not optional if you want accurate profit. You may still not submit accounts separately to HMRC, but the work involved is clearly “accounts work”. The tax return is just the final reporting step.

Common misunderstandings about sole trader accounts

One misunderstanding is that you only need records if you are VAT registered. In reality, VAT registration adds extra obligations, but record-keeping is always important for Self Assessment.

Another misunderstanding is that “accounts” are only necessary if you are making a profit. Even if your business makes a loss, you still need to keep records and report the results. Losses can have tax implications and may be carried forward or used against other income depending on the rules and your circumstances.

A third misunderstanding is that you can rely on bank statements alone. Bank statements are useful, but they rarely provide enough detail to categorise expenses correctly, and they don’t capture cash transactions or explain business purpose. Receipts, invoices, and logs still matter.

Do sole traders need to file accounts anywhere else, like Companies House?

Sole traders do not file accounts at Companies House because they are not incorporated companies. There is no public register filing requirement for sole trader accounts in the way there is for limited companies. Your business financial information is generally not filed publicly through company accounts.

However, there are rare circumstances where reporting to other bodies can arise, depending on the industry. For example, certain regulated professions or licences may require financial information. Those obligations are not the standard “submit accounts” process, but they can feel similar.

What happens if HMRC opens an enquiry?

If HMRC reviews your return, they may ask for evidence supporting specific figures. This could include bank statements, invoices, receipts, contracts, and bookkeeping reports. They may also ask how you calculated apportionments like home working or phone use.

If you have prepared accounts or at least maintained clean bookkeeping with reconciliations, responding is far easier. If your figures were estimated or your records are incomplete, it becomes harder to defend your return, and you can spend significant time reconstructing information.

Being able to provide a clear profit and loss statement, along with supporting documents, helps demonstrate that you took reasonable care and that your figures are based on evidence rather than guesses.

Practical tips for keeping “accounts-ready” records all year

Choose a system you will actually use. This might be accounting software, a spreadsheet, or a bookkeeping app. The best system is the one you can maintain consistently.

Set a routine. Weekly or fortnightly bookkeeping prevents end-of-year panic and helps you spot cashflow issues early.

Keep digital copies of receipts. Paper fades and gets lost. A simple scanning habit can save you later.

Separate business and personal spending where possible. A dedicated business bank account makes categorisation simpler and reduces the risk of mistakes.

Track mileage and business travel as you go. Trying to recreate it months later is rarely accurate.

Use categories that match how you’ll report. If you categorise expenses sensibly, completing the tax return becomes mostly a matter of extracting totals.

So, do sole traders need to submit accounts as well as a tax return?

For most sole traders, you submit a tax return with business income and expense figures, rather than filing separate statutory accounts. In that narrow sense, the answer is usually no: you don’t submit accounts as an additional formal filing like a company does.

But in the broader, practical sense, you do need accounts in the form of accurate records and a clear calculation of profit. You must be able to evidence the figures on your tax return. And you may need to present accounts to lenders, landlords, or clients, even though HMRC doesn’t require you to attach them to your return.

The best way to think about it is this: the tax return is the declaration you file, while your accounts are the story behind the numbers. You may not always hand over the whole story, but you need to have it written down and supported by evidence.

Final checklist for sole traders

Prepare and submit your Self Assessment tax return on time, including the self-employment section if you are trading.

Keep good business records throughout the year, including evidence of income and expenses.

Decide on a bookkeeping approach that suits your business complexity, and apply it consistently.

Prepare a profit calculation (and ideally a profit and loss statement) before completing the return.

Be ready to provide accounts-style reports if you apply for finance, a mortgage, or contracts.

Get professional help if your situation is complex, your records are messy, or you want to reduce risk and improve planning.