Stop being self-employed

Complete guide to closing your self-employment: notifying HMRC, final tax returns, overlap relief, and pension contributions.

Tell HMRC you've stopped trading

You must notify HMRC within specific timeframes. If you registered for Class 2 National Insurance, you need to tell HMRC separately.

Earliest notification date: No more than 7 days before you actually stop self-employment
Online notification: Complete the 'Stopping self-employment' form via Government Gateway
Telephone notification: Call HMRC Self Assessment helpline on 0300 200 3310
CIS contractors telephone: Call 0300 200 3210 to cancel CIS registration
Information required: National Insurance number and Unique Taxpayer Reference (UTR)
Earnings threshold for registration: Do not need to be registered if you earn £1,000 or less in a tax year

You must tell HMRC if you stop trading as a sole trader or leave a business partnership. If you do not notify HMRC, they will continue sending Self Assessment tax returns and may issue late filing penalties or create estimated tax bills.

Tell HMRC you have stopped being self-employed (opens in a new tab)

File your final Self Assessment return

Your final tax return covers the period from 6 April to your cessation date. Different deadlines apply depending on when you stopped trading.

Paper return deadline: 31 October following the end of the tax year
Online return deadline: 31 January following the end of the tax year
Payment deadline: 31 January following the end of the tax year
Example (cease in 2024/25): Paper by 31 October 2025, online and payment by 31 January 2026

You must submit a Self Assessment tax return for the tax year in which you ceased trading. This must include trading income from the start of your accounting period to your cessation date, plus any capital allowances, balancing charges, and terminal loss relief claims.

Self Assessment tax return deadlines (opens in a new tab)

Claim overlap relief

If you had overlap profits from when you started trading (common before basis period reform), you can claim relief on your final return. This reduces your final year profits.

Reform effective date: 6 April 2024
New tax year basis: Businesses taxed on profits arising in the tax year itself
Final year basis period starts: Day after end of previous year's basis period
Final year basis period ends: Date of cessation
Simplification: No special cessation rules needed under tax year basis

From 2024/25, the tax year basis applies to all self-employed businesses. This simplifies final year calculations as profits are simply those arising from the start of the tax year to the cessation date.

Basis Period Reform (opens in a new tab)

Calculate final capital allowances

Work out balancing adjustments on assets you owned. If you sell assets for more than their written-down value, you may have a balancing charge. If less, you get a balancing allowance.

Cessation rule: Enter balancing charge or balancing allowance instead of claiming capital allowances
Balancing charge trigger: Disposal proceeds exceed remaining pool balance
Balancing allowance trigger: Available for single asset pools or when closing business
Asset valuation rule: Use sale price, or market value if gifted, converted to personal use, or sold below value

In the year of business closure, standard capital allowance claims are replaced by balancing adjustments. A balancing charge is added to taxable profits if disposal proceeds exceed the pool balance. A balancing allowance is deducted from profits if there is unclaimed value from writing-down allowances.

Capital allowances when you sell an asset (opens in a new tab)

Claim terminal loss relief

If you make a loss in your final 12 months of trading, you can carry it back against profits from the previous 3 years. This can generate a tax refund.

Eligibility: Loss in the final 12 months of trading
Carry-back period: Loss can be carried back against profits of the same trade in the cessation year and 3 prior years
Order of set-off: Start with the most recent year first (LIFO)
How to claim: Include in Self Assessment tax return or write to HMRC
Claim deadline (2024/25 cessation): 5 April 2029

HS227 Losses helpsheet (opens in a new tab)

Cancel VAT registration

How and when to deregister for VAT, final return requirements, and what to do with stock on hand.

VAT on cessation

You must account for VAT on any stock or assets on hand at deregistration if their total value exceeds the deregistration threshold.

Notification deadline: Within 30 days of becoming ineligible
Deregistration threshold: Below £88,000 taxable turnover
Stock and assets rule: If VAT on remaining stock/assets exceeds £1,000, account for it on final VAT return
Processing time: HMRC typically requires 3 weeks to confirm cancellation
Record retention: Keep VAT records for 6 years after cancellation

Cancel your VAT registration (opens in a new tab)

Business Asset Disposal Relief

If you sell business assets when closing, you may qualify for Business Asset Disposal Relief (formerly Entrepreneurs' Relief). This reduces Capital Gains Tax to 14% on qualifying gains up to your lifetime limit (rising to 18% from April 2026).

Previous name: Entrepreneurs' Relief
CGT rate (before 6 April 2025): 10%
CGT rate (6 April 2025 to 5 April 2026): 14%
CGT rate (from 6 April 2026): 18%
Lifetime limit: £1,000,000 (cumulative, not annual)
Ownership requirement: Must have owned the business for at least 2 years
Asset disposal deadline: Within 3 years of cessation to qualify for relief
Claim deadline (2024/25 disposal): 31 January 2027

Business Asset Disposal Relief reduces Capital Gains Tax on qualifying business disposals by sole traders and business partners. You must have owned the business for at least 2 years and must dispose of assets within 3 years of ceasing to trade.

Business Asset Disposal Relief (opens in a new tab)

Keep business records after closing

How long to keep tax records, bank statements, invoices, and receipts after you stop self-employment.

Records retention requirements

Different records have different retention periods. Tax records must be kept for 5 years minimum; some employment and contract records for longer.

Minimum retention period: At least 5 years from 31 January following the end of the relevant tax year
Example (cease in 2024/25): Keep records until at least 31 January 2031
VAT records (if registered): 6 years from date of record
What to keep: Sales and income records, purchases and expenses, bank statements, Self Assessment returns

Self-employed record keeping (opens in a new tab)

Close your PAYE scheme

Final RTI submissions, P45s, and HMRC notifications when closing your payroll.

Key cessation deadlines

Missing deadlines triggers automatic penalties. Plan your closure timeline to meet all notification and filing requirements.

Notify HMRC of cessation: As soon as possible after stopping (no more than 7 days before actual cessation date)
Cancel VAT registration: Within 30 days of ceasing to be eligible
Final Self Assessment (paper): 31 October following end of tax year
Final Self Assessment (online): 31 January following end of tax year
Pay final tax owed: 31 January following end of tax year
Terminal loss relief claim: 5 April 4 years after end of cessation tax year
Business Asset Disposal Relief claim: 31 January 2 years after end of tax year of disposal
Dispose of assets for BADR: Within 3 years of cessation
Keep business records: At least 5 years from 31 January after tax year end

Stop being self-employed (opens in a new tab)

Change from sole trader to limited company

How to incorporate your business, transfer assets, and manage the tax implications of changing structure.

Stop your sole trader business

Stop being self-employed

Cancel VAT registration

Keep business records after closing

Close your PAYE scheme

Change from sole trader to limited company

Related journeys

Sell your business

Close your company

Transfer ownership of your business

Change your business structure