Do sole traders need to submit accounts to HMRC?

Do sole traders need to submit accounts to HMRC?

If you run a business on your own in the UK, it’s normal to hear people talk about “filing accounts” and wonder whether you’re supposed to send a set of formal accounts to HMRC each year. The short version is: sole traders generally do not submit statutory accounts to HMRC in the way limited companies do, but you do need to report your business income and expenses (and keep records that support those figures). Those records are effectively your “accounts” in everyday language, even if they aren’t formatted as a full balance sheet and profit and loss statement.

This topic can feel confusing because the word “accounts” gets used in a few different ways. Some people mean “annual accounts” like a limited company prepares; others mean “bookkeeping records”; and others mean the “figures on the tax return.” HMRC cares about the accuracy of your taxable profit, and it expects you to keep adequate records to prove it. Whether you prepare formal accounts is partly a business choice and partly driven by what you need for your tax return, your bank, a mortgage application, or your own management information.

What “submitting accounts” usually means in the UK

When people say “submit accounts,” they’re often thinking about limited companies. A limited company typically has to prepare annual statutory accounts and file them with Companies House. Depending on circumstances, the company also files a company tax return (CT600) to HMRC with tax computations and supporting figures. That process has a clear “accounts filing” element that feels very official and separate from the tax return.

Sole traders don’t have that Companies House filing requirement because a sole trader business is not a separate legal person from the individual. Instead, the business’s profit is taxed as part of your personal tax position. Your main annual obligation is to declare your trading results through Self Assessment.

So if your question is, “Do I need to send HMRC a set of company-style statutory accounts?” the answer for most sole traders is no. But you do have to provide the numbers that represent your business performance for the year, and you should be able to evidence them.

What sole traders actually submit to HMRC

Most sole traders report their business income and expenses as part of their Self Assessment tax return. Typically, that means completing the self-employment (SA103) section. In that section you either:

1) enter summary totals (income and allowable expenses) and HMRC calculates your taxable profit, or

2) in certain cases, provide a bit more detail or additional adjustments depending on the nature and size of the business.

There are two broad approaches for sole traders:

Using the trading allowance or simplified reporting (where eligible): Some very small businesses may be able to use simplified approaches. For example, the trading allowance can allow you to claim a flat £1,000 allowance instead of claiming actual expenses, if that suits your circumstances. This is still “submitting figures,” just with a simplified expense claim.

Using actual income and actual allowable expenses: This is the most common approach. You total your sales/income and subtract allowable business expenses to arrive at taxable profit. You submit those totals in the tax return.

Even though you’re not usually uploading or attaching a formatted set of accounts, the numbers you submit should come from reliable bookkeeping records. In practice, many sole traders produce a simple profit and loss statement (sometimes called an income and expenditure account) to arrive at the totals they need for Self Assessment.

Do sole traders ever have to send accounts to HMRC?

Most of the time, HMRC does not ask for your full accounts document at the point of filing. However, there are scenarios where you might provide more information or documentation:

1) HMRC asks to see your records: HMRC can open a compliance check (sometimes called an enquiry) and ask for evidence of your income and expenses. If that happens, you may provide spreadsheets, bookkeeping reports, bank statements, invoices, receipts, mileage logs, and any accounts you have prepared.

2) You’re applying for something that requires accounts: Banks, mortgage lenders, landlords, investors, and grant providers sometimes ask for “accounts” or “proof of earnings.” That’s not an HMRC requirement, but it can influence whether you choose to prepare more formal year-end accounts.

3) You use an accountant who prepares accounts as part of the process: Many accountants prepare annual accounts for sole traders because it’s a sensible way to summarise the business, check for mistakes, and support the tax return figures. That doesn’t necessarily mean those accounts are filed with HMRC as a separate document; it means they are used to compile the return and kept on file.

4) Your accounting basis or specific tax adjustments require clearer documentation: Some items—like capital allowances, private use adjustments, stock, work-in-progress, or changes in accounting basis—are easier to handle correctly if you prepare proper accounts.

So, while sole traders generally don’t “submit accounts” in the same way companies do, it’s still accurate to say that you must keep accounts/records and be ready to provide them if HMRC requests them.

Accounts vs bookkeeping vs tax return figures

It helps to separate three layers:

Bookkeeping records: This is the day-to-day detail: sales invoices, receipts, expense invoices, bank transactions, cash takings, and so on. Bookkeeping is the foundation.

Year-end accounts (management or simplified accounts): This is a summary of the year, often a profit and loss statement and possibly a balance sheet. For many sole traders, a simple income and expenditure summary is enough. More complex businesses might also track debtors, creditors, stock, and accruals.

Tax return figures: These are the totals you enter on Self Assessment, sometimes adjusted from your accounting profit to your taxable profit (for example, by disallowing non-business expenses or applying capital allowances).

HMRC receives the tax return figures. You keep the bookkeeping records and any accounts you prepared to support those figures.

What records do sole traders need to keep?

Whether you call them “accounts” or “records,” HMRC expects you to keep enough information to back up your tax return. Good record-keeping also makes your life easier, especially as the business grows.

Common records include:

Sales and income evidence: invoices issued, till reports, booking system summaries, online marketplace statements, Stripe/PayPal summaries, client contracts, and bank receipts that show payments received.

Expense evidence: receipts, supplier invoices, subscription confirmations, travel tickets, mileage logs, and bank or credit card statements.

Business asset records: details of equipment purchases, vehicles, laptops, tools, and other items that may be treated as capital expenditure.

VAT records (if VAT registered): VAT invoices, VAT return workings, and evidence supporting output and input tax.

Employment records (if you employ staff): PAYE records, payslips, pension contributions, and RTI submissions.

Some sole traders keep records in a spreadsheet. Others use accounting software and attach photos of receipts. Either way can work, provided the records are complete, accurate, and can be produced if needed.

Cash basis vs traditional accounting

One reason people ask about “accounts” is that accounting can be done on different bases. Sole traders commonly use one of these:

Cash basis: You record income when you receive it and expenses when you pay them. This can be simpler for many small businesses because it aligns closely with the bank account. Under cash basis, you might not need to calculate things like debtors and creditors at year-end (with some exceptions and limitations).

Traditional accounting (accruals basis): You record income when you earn it (for example, when you issue an invoice for work completed) and expenses when you incur them, regardless of when the money changes hands. This can give a clearer picture of performance, particularly if you invoice clients and pay suppliers on credit terms.

Both approaches still require you to keep records. The basis you use affects the figures you report. If you use the cash basis, your “accounts” may look like a bank-driven summary. If you use the accruals basis, you may need year-end adjustments for unpaid invoices, unpaid bills, prepayments, and so on.

What should be included in a sole trader’s “accounts”?

Even though you might not be submitting a formal accounts package to HMRC, it’s useful to understand what a good year-end summary typically covers. At a minimum, you want to be able to show how you arrived at your profit number.

A basic sole trader year-end summary often includes:

Total income: sales, fees, commissions, online sales, tips (where taxable), and any other business income.

Cost of sales (where relevant): stock purchases, direct materials, subcontractor costs linked directly to production or service delivery.

Overheads: rent, utilities (business portion), phone/internet (business portion), software, insurance, marketing, professional fees, travel, and other running costs.

Adjustments: private use adjustments (for example, if your mobile phone is partly personal), disallowed expenses (such as certain entertaining costs), and any accounting adjustments if you use accruals.

Capital allowances or simplified expenses: some equipment purchases aren’t treated as day-to-day expenses in the same way, and you might claim capital allowances or simplified expenses depending on the rules and your circumstances.

You can prepare this as a spreadsheet report, a print-out from accounting software, or a set of accounts prepared by an accountant.

Allowable expenses and common pitfalls

HMRC generally allows deductions for expenses incurred “wholly and exclusively” for the purposes of the trade. In real life, many expenses are partly business and partly personal, which means you may need to apportion.

Common pitfalls include:

Mixing personal and business spending: Using one bank account for everything can make bookkeeping harder and increases the risk of missing deductions or claiming personal expenses. Many sole traders find a separate business bank account helpful, even though it’s not always legally required.

Not keeping evidence: If you can’t show a receipt, invoice, or clear bank transaction description, it’s harder to justify the expense.

Claiming disallowable costs: Some expenses are restricted. For example, client entertaining is a common area of confusion. It may feel like a business cost, but tax treatment can be limited.

Forgetting irregular costs: Annual insurance, one-off repairs, professional memberships, and equipment purchases often get missed if you only look at monthly patterns.

Proper records and a year-end review reduce these issues and make your Self Assessment submission more robust.

Do sole traders need to prepare a balance sheet?

Many sole traders do not prepare a formal balance sheet, especially if they use the cash basis and have a straightforward business. However, a balance sheet can still be useful, and in some situations it becomes more relevant:

If you hold stock: A stock count and valuation at year-end can be important for businesses that buy and sell goods.

If you have significant debtors and creditors: If you invoice clients and allow time to pay, you may have money owed to you at year-end. Likewise, you may owe suppliers. Tracking these amounts helps you understand cash flow and profitability.

If you have loans or finance agreements: A simple balance sheet can help you monitor what you owe and when it’s due.

Even if you don’t produce a formal balance sheet, you should be able to explain major business assets and liabilities if asked, and you should record items like equipment purchases and borrowing clearly.

How long should sole traders keep records?

As a general principle, you should keep your business records long enough to support the figures you submit and to respond to any questions later. That means retaining invoices, receipts, bank statements, and accounting summaries for an appropriate period after the filing deadline for the relevant tax year. It’s sensible to keep organised digital copies, and many businesses keep records longer than the minimum because it helps with trend analysis, lender requests, and general business continuity.

Keeping records isn’t just about HMRC compliance; it also protects you if a client disputes a charge, if you need to chase an old invoice, or if you want to review how your pricing has changed over time.

What happens if HMRC asks for your accounts?

If HMRC opens a check into your return, it will typically ask questions about specific figures and request supporting evidence. The request may focus on:

• income completeness (have all sales been included?)

• large or unusual expense claims

• travel and motor costs

• use of home claims

• capital allowances

• cash takings and how they’re recorded

In response, you might provide your bookkeeping export, a profit and loss report, bank statements, invoices, receipts, and explanations of how you calculated certain claims (such as mileage or home working). If you do prepare annual accounts, you may share them too, but HMRC’s main objective is verifying that the tax return figures are correct.

The best way to make this painless is to keep consistent records throughout the year and to be able to trace each number in your return back to source evidence.

Do you need an accountant to prepare accounts?

You are not automatically required to hire an accountant as a sole trader, and many people handle their own bookkeeping and Self Assessment successfully. However, an accountant can be valuable if:

• your business is growing and your transactions are increasing

• you’re unsure about allowable expenses or private use adjustments

• you have stock, subcontractors, or complicated projects

• you’re considering VAT registration or already VAT registered

• you want planning advice (for example, whether incorporation might make sense)

Many sole traders find the main benefit isn’t just “getting the return done” but having confidence that the figures are correct, optimised, and supported.

How Making Tax Digital may affect what you do

Even if you’re not “submitting accounts” now, the broader direction of travel in UK tax administration has been toward more digital record keeping. If you use accounting software, you may already be producing reports that look like accounts, and those reports can feed directly into tax submissions. If you keep records in spreadsheets, you might still be able to comply, but you’ll want to be disciplined about updates, backups, and audit trails.

From a practical perspective, the more your record keeping is maintained throughout the year, the less stressful your year-end becomes. It also reduces the risk of accidental omissions, such as forgetting cash income or missing subscriptions that renew annually.

Practical ways to keep “accounts” without overcomplicating it

Many sole traders imagine that “accounts” means complicated accounting terminology and hours of spreadsheet work. It doesn’t have to. Here are practical approaches that work well for many small businesses:

1) A separate business bank account: Keeping business transactions separate makes it easier to track income and expenses and reduces the risk of claiming personal costs.

2) A simple monthly routine: Set aside a regular slot each month to record invoices, reconcile bank transactions, and file receipts. If you do this monthly, you avoid the year-end scramble.

3) A clear receipt system: Use a receipt capture app or save digital receipts in folders by month. Name files consistently (for example, “2025-11-15_SupplierName_Amount”).

4) Track mileage and home working as you go: If you claim mileage, keep a log with date, purpose, start/end, and miles. If you claim for use of home, record how you calculated it and keep supporting utility bills or a simplified method record where relevant.

5) Keep an eye on tax: Sole traders often need to budget for Income Tax and National Insurance. Regularly reviewing your profit helps you estimate tax and avoid surprises.

These habits produce records that are “account-like” and can be quickly turned into the totals you need for HMRC.

What about partnerships and side hustles?

Sometimes people use “sole trader” loosely when their situation is slightly different. If you’re in a partnership, you may need to submit partnership information in addition to your personal return. If you have a small side hustle alongside employment, you might still report self-employment income through Self Assessment depending on your circumstances. In these cases, the idea remains similar: you generally submit figures, not statutory company accounts, but you still keep records and support the totals you report.

If you have multiple income streams—say, freelance work, online sales, and a part-time job—good record keeping becomes even more important. It helps ensure you classify income correctly and don’t mix expense claims across different activities.

Common misunderstandings to clear up

“I’m a sole trader, so I don’t need to keep receipts.”
You still need evidence to support what you claim. Even if you submit only totals, those totals should be backed by records.

“HMRC will calculate my profit for me.”
HMRC may calculate tax based on the numbers you submit, but you are responsible for ensuring those numbers are accurate and complete.

“If I don’t submit accounts, HMRC can’t check.”
HMRC can ask for records and explanations. The fact that you don’t attach accounts to the return doesn’t remove the need to keep them.

“Accounts have to be complicated.”
For many sole traders, a simple, well-organised summary of income and allowable expenses is enough, provided it’s accurate and supported.

So, do sole traders need to submit accounts to HMRC?

In most cases, sole traders do not submit formal statutory accounts to HMRC as a separate document. Instead, you submit your business income and expense totals through Self Assessment, and you keep the underlying records that support those figures. Those records function as your accounts: they show what you earned, what you spent, and how you arrived at your taxable profit.

If HMRC asks, you should be ready to provide evidence, and if you want better financial control—or you need to demonstrate income to a lender—you may choose to prepare more structured accounts anyway. The key is not whether you create a polished document, but whether your figures are correct, consistent, and backed by reliable records.

Next steps for sole traders who want to stay compliant

If you’re unsure whether your current approach is enough, these steps are a solid starting point:

• Make sure you’re recording all income and keeping evidence of it.

• Keep receipts and invoices for business costs and note any private use where relevant.

• Decide whether you’re using the cash basis or accruals approach, and apply it consistently.

• Produce a simple year-end profit summary that ties back to your records.

• Keep records in an organised way so you can respond quickly if questions arise.

Taking these steps will help you complete Self Assessment with confidence and reduce the risk of errors, missed deductions, or stressful last-minute work. In that sense, you may not “submit accounts” in the formal company sense, but you do run your business best when your records and year-end summary are strong enough to stand up as accounts.