Summary of New Tax Rules for Sole Traders in 2025United Kingdom (UK)1. Income Tax Deadlines and PaymentsPayments on account:31 January 2025: Final payment for the 2023/24 tax year and first paymen
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- Feb 11
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1. Income Tax Deadlines and Payments
Payments on account:
31 January 2025: Final payment for the 2023/24 tax year and first payment on account for the 2024/25 tax year.
31 July 2025: Second payment on account for the 2024/25 tax year.
Balances for the 2024/25 tax year must be paid by 31 January 2026.
Self Assessment deadlines:
Paper returns: Due by 31 October 2025.
Online submissions: Due by 31 January 2026.
New businesses: Must notify HMRC by 5 October 2025 to avoid penalties.
2. Accounting Methods
Default accounting method: The cash basis will apply unless the trader opts out. The previous turnover thresholds of £150,000/£300,000 and the £500 interest deduction limit have been removed.
Basis period reform: This aligns taxable profits with the UK tax year (6 April to 5 April). For self-employed individuals, additional days (1-5 April 2025) are included for the 2024/25 tax year.
3. Allowable Expenses
Losses can now be offset against other taxable income, a change from previous restrictions.
The £500 cap for interest deductions has been eliminated.
4. National Insurance Contributions (NIC)
NIC is now integrated with income taxes through "payments on account." There are no specific rate changes mentioned.
5. Compliance Requirements
UK sole traders will need to adjust their record-keeping to align with tax year reporting, especially those who do not follow an April accounting date.
There is flexibility to opt out of the cash basis or choose traditional accounting for different businesses.
Note: No significant changes to income tax rates have been reported for 2025, but the reforms in accounting methods may substantially affect profit calculation and expense reporting.
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