Stopping trading as a sole trader, or leaving a business partnership, does not end your Self Assessment duties. You must tell HMRC and send a return for the tax year in which you stopped.
What to do
-
Tell HMRC you have stopped
Use the online service, or phone or write to HMRC.
-
Work out your final profit
Include balancing charges or allowances on your assets and any Capital Gains Tax on assets you sold.
-
Claim any terminal loss relief
Do it in the return itself.
-
Send the return by 31 January
File online for the tax year you stopped in, and pay any tax due by the same date.
-
Ask to reduce payments on account
Do this if your final bill will be lower than last year's.
What the return covers
Your trading profit is for the period from the start of the tax year on 6 April to the day you stop. Any other income and gains are reported for the whole tax year.
For example, if you stop trading on 15 September 2026, your return covers trading profit from 6 April 2026 to 15 September 2026. It is for the 2026 to 2027 tax year, so you send it online by 31 January 2028.
Tell HMRC you have stopped
Send the return and pay
Work out your final profit
The return needs your trading income, your allowable expenses, your capital allowances and any Capital Gains Tax on assets you sold. Some costs of closing down can be allowable expenses, for example the phone, internet and postage costs of telling people you are closing.
Balancing charges and allowances
You cannot claim the annual investment allowance on items bought in your final accounting period. Closing the business counts as disposing of everything you still own, so you work out a balancing charge or allowance on your assets instead.
Use market value instead of the sale price if you gave an asset away, kept it for personal use, or sold it for less than it was worth to someone who cannot claim allowances. Only the main and special rate pools can give a balancing allowance, and only when you close the business. If you use the cash basis, you claim capital allowances on cars only.
Capital Gains Tax on assets you sell
You may owe Capital Gains Tax on assets such as premises or goodwill. Business Asset Disposal Relief can cut the rate. When you are closing, you must have been a sole trader or partner and owned the business for at least 2 years up to the date it closed, and you must dispose of the business assets within 3 years.
Claim terminal loss relief if you made a loss
The terminal loss is the loss from 6 April to the day you stop, plus the loss in the part of the previous tax year that falls in the 12 months before you stop. It cannot be set against other income. Make the claim in your final return, saying how much loss you use against each year. It reduces the tax you paid for those years.
Reduce your payments on account
Payments on account are set from your previous year's bill, so they can be much higher than the tax on a short final year. Ask HMRC to reduce them if you expect to owe less.
After you file
HMRC gives you a tax calculation once you have filed, and your Self Assessment statement shows what to pay by 31 January. Keep your business records for the period HMRC requires after you stop.
Tell HMRC you have stopped self-employment (opens in a new tab)
Legal basis
Primary legislation and key regulations