Archives 2025

Artificial intelligence is no longer science fiction; it’s a powerful tool that’s reshaping how we work, hire and lead. For you as an employer, the rise of AI in HR presents a massive opportunity. It can slash admin, streamline payroll and deliver insights that were once out of reach. But it also raises a crucial question: how do you embrace this technology without losing the most important part of Human Resources—the human?

The fear is that AI will turn people management into a cold, robotic process. But that’s a failure of imagination. When used correctly, AI doesn’t replace the human touch; it frees you up to be more human. By automating the grunt work, it gives you back the time to focus on what really matters: your people.

Let’s cut through the hype and look at how you can use AI to build a more efficient, strategic and genuinely connected workplace.

What is an AI use policy?

Before you dive in, you need a rulebook. An AI use policy is a formal document that outlines how your business will use AI technologies responsibly, ethically and transparently. It’s not just a nice-to-have; it’s essential for building trust and managing risk.

This policy should align with the UK’s AI regulation roadmap and your obligations under GDPR. It sets clear boundaries, defines accountability and ensures that any AI-assisted decisions are fair and explainable. It’s your public commitment to using technology as a force for good.

Communicating an AI use policy to the workforce

Introducing Artificial Intelligence can make employees nervous. They might worry about job security or being managed by an algorithm. Clear communication is your best tool to turn that fear into confidence.

When you introduce your AI policy, be transparent. Explain the ‘why’ behind the change, focusing on how it will help the business and make their jobs better. Train your managers to answer questions and lead by example. Reassure your team that AI is a sidekick, not a replacement—a tool to help them work smarter, not harder. Our AI adoption guide can help you navigate this change.

Using AI to perform tasks in the HR function

The most immediate impact of AI in HR is on the administrative tasks that eat up your day. Think about the hours spent on payroll, benefits administration and compliance checks. This is where AI delivers a quick and powerful win.

Automation driven by AI can process timesheets, calculate pay and flag potential errors with incredible accuracy, reducing the risk of costly mistakes. It can manage benefits enrollment and answer common employee questions, freeing your HR team from the repetitive queries that fill their inbox. The result is a more efficient, accurate and streamlined back-office operation.

Applying AI to the employee lifecycle

The power of AI extends far beyond admin. It can enhance every single stage of your employee’s journey, from the first application to their long-term career growth.

Attraction, selection and onboarding

AI tools can transform your recruitment process. They can screen CVs to identify top candidates based on skills and experience, reducing manual review time. This helps you find the right people faster and supports your efforts to build a team for small business growth.

However, you need to be careful. Algorithmic bias is a real risk. To support compliance with the UK Equality Act 2010, you must ensure your AI tools are programmed to make decisions based on merit alone, without discriminating. Human oversight is non-negotiable here.

Compliance and policy management

Staying on top of ever-changing employment law is a huge challenge. AI can act as your compliance co-pilot. It can monitor legislative updates, flag potential risks in your processes and help ensure your record-keeping is accurate and secure. 

Crucially, your AI implementation must be aligned with key data protection and privacy legislation globally. This includes regulations like the General Data Protection Regulation (GDPR) as well as similar laws in other regions. Compliance ensures the secure handling of sensitive employee data, which is paramount when leveraging AI.

This strengthens your data protection practices and gives you peace of mind that you’re meeting your obligations.

Reward and wellbeing

How do you know if you’re paying your people fairly? AI-driven tools can analyse market data to provide real-time pay benchmarks, helping you create competitive and equitable reward strategies.

Beyond pay, AI can also offer powerful insights into employee wellbeing. By analysing anonymised data on engagement and work patterns, it can help you spot early signs of burnout and take proactive steps to support your team. Personalised wellbeing resources, delivered through AI, can significantly improve the AI and employee experience.

Learning and development, talent assessment and career progression

AI can create a more dynamic and personalised approach to employee growth. AI-enabled platforms can map your team’s existing skills, identify gaps and recommend tailored training content. Adaptive learning platforms adjust to an individual’s pace and style, making development more effective. For career progression, AI can help visualise potential career paths within the company, showing employees what opportunities are available and what skills they need to get there.

Management and performance management

AI enhances performance management by providing data-driven insights rather than relying solely on subjective opinion. It can track progress against goals, analyse performance metrics and even provide prompts to managers for coaching conversations. The key is to use this data to start conversations, not replace them. Over-reliance on metrics can feel like surveillance, so it’s vital to maintain fairness and human judgement.

What are the risks of implementing AI in the HR process?

Embracing AI isn’t without its challenges. The biggest risks include:

• Algorithmic bias: If the AI is trained on biased data, it can perpetuate and even amplify unfairness in hiring or promotions.
• Data privacy: You are handling sensitive employee data, so you must ensure your AI systems are secure and GDPR-compliant. The ICO has clear guidance on this.
• Over-surveillance: Using AI to monitor employees can erode trust and create a toxic culture if not handled with complete transparency.
• Lack of human oversight: AI makes predictions, but humans make judgments. Relying on AI for final decisions without a human review is a recipe for disaster.

As the CIPD recommends, the solution is transparency, ethical design and keeping a human in the loop at all times.

What are the benefits of implementing AI?

When managed responsibly, the upsides of AI are transformative. You can expect:

• Massive efficiency gains: Automating repetitive tasks saves hundreds of hours.
• Reduced costs: Fewer errors in payroll and more efficient processes lead to direct cost savings.
• Improved accuracy: AI is far less prone to human error in data-heavy tasks.
• Strategic decision-making: With data-driven insights at your fingertips, you can make smarter, more informed decisions about your people strategy.
• Empowered HR: Freeing your HR team from admin allows them to become the strategic partners you need them to be.

How to keep the human in HR management

So, how do you get the best of both worlds? The key is to view AI as a tool that augments human connection, rather than replacing it. Use the time AI saves you to have better conversations. Analyse the data, but use your empathy and experience to interpret it. Celebrate successes in person, handle difficult conversations with care and build a culture where technology serves people, not the other way around.

Preparing your HR team for AI transformation

Your HR team is central to this journey. You need to bring them with you. Start by providing training on AI literacy and ethical considerations. Involve them in testing and selecting new HR software. Encourage them to experiment with new tools in a safe environment. This isn’t just about learning new skills; it’s about shifting mindsets from administrative support to strategic partnership.

The future of AI in HR and payroll

This is just the beginning. The AI work guide shows a future where AI will become even more integrated into our daily work lives, offering predictive insights and hyper-personalised experiences. The businesses that thrive will be those that master the balance—using technology to drive efficiency while doubling down on the human connection that makes a workplace great.

With AI-enhanced HR, you have an incredible opportunity to build a more strategic, efficient and people-focused business.

Are you ready to explore what AI can do for you? Let’s talk.

Taxes are a fact of life and income tax is usually the most significant for the majority of us. But UK income tax isn’t the same for everyone. UK income tax brackets put people into different categories, with different levels of taxation dependent on how much you earn. 

We also calculate and pay our income tax in different ways, either through our workplace or through self-assessment tax returns. There’s also the responsibility of employers to accurately deduct it from payslips and provide the right information to HMRC. 

Let’s take a look at how UK income tax works, including bands, personal allowance and how it is calculated.   

What is income tax? 

Put simply, UK income tax is a tax you pay on what you earn. This could be money you earn doing your job, income from renting out property, profit you make from being self-employed or things like pensions and other state benefits. 

The amount you pay depends on how much you earn, along with a few other factors. This is split up into what are known as tax bands, which dictate the rate you pay. As you earn more, you enter higher bands, so you pay more on specific portions of your income.  

Most people also get a Personal Allowance, which is an amount you don’t have to pay tax on. But we’ll dive into that later. 

There are also many types of earnings that aren’t subject to UK income tax, including interest from certain bank accounts such as Individual Savings Accounts (ISAs), some state benefits and National Lottery or premium bond wins.

How is income tax collected?  

HMRC collects income tax in a couple of ways, mainly depending on your employment status. Most people will pay their income tax through PAYE (Pay As You Earn), meaning their employer will deduct it from their salary using their tax code. 

The other way to pay UK income tax is through a Self Assessment, where you provide the details of your income from self-employment, rentals or other sources. 

Accuracy and timeliness are vital with both of these methods, with penalties being enforced for submitting late returns or not deducting the correct amounts. This is why it’s so important for business owners and leaders to understand their obligations when it comes to UK income tax and payroll. Even when you’re automating the process with software or outsourcing payroll to someone else, it’s still your legal responsibility to get it right.  

What is the personal allowance?

In the UK, Personal Allowance is the amount you can earn each financial year before you have to pay income tax. 

The standard Personal Allowance for the current tax year 2025/26 is £12,570. This is the same as the previous two years, but it can change from time to time due to the government setting new budgets and policies. So if your salary was £30,000 per year, you’d only pay income tax on £17, 430 of it.  

Your Personal Allowance also decreases if you earn more than £100,00, going down by £1 for every £2 over the threshold. This means it reduces to zero once you earn more than £125,140, meaning you’d pay income tax on all your earnings. 

UK income tax bands and rates 2025/26

In the UK, income tax is calculated using a system of tax bands. These bands determine how much tax you pay on different portions of your income. As your earnings increase, each portion falls into a specific band, with higher rates applying only to income above certain thresholds.

A common misconception is that moving into a higher tax band means you’ll pay that higher rate on all your income. In reality, each rate only applies to the income that falls within its range. For example, if you earn £55,000, you’ll pay 20% on the portion between £12,571 and £50,270, and 40% only on the amount above £50,271. Everything up to your Personal Allowance is tax-free.

This is how much you pay per tax band in the financial year 2025/26: 

Band	Taxable income	Tax rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	over £125,140	45%

Though income tax applies across the UK, the devolved governments can set their own rates or have slightly different tax bands. Currently, the Welsh government has set the income tax rates in Wales to match England, while Scotland has slightly different tax bands above the standard Personal Allowance. Income tax in Northern Ireland also currently matches the rates in England and Wales. 

How employers calculate and deduct income tax

Taxpayers in full-time employment usually have their income tax handled by the PAYE system. If you’re an employer or HR professional in charge of payroll, you’ll be very familiar with PAYE. 

PAYE is the way most people will pay their income tax as well as their National Insurance contributions. HMRC provides employers with tax codes to work out these amounts. You’ll find more about tax codes in our downloadable guide. 

The tax code gives the employer the information they need to figure out how much tax each employee owes. Employees will then see this information on their payslips, showing deductions like income tax and National Insurance as well as things like student loan repayments. 

What happens if employees overpay or underpay tax?

Accuracy is important when it comes to payroll and tax calculations, but mistakes can happen. Often, this can be due to internal admin errors or being sent the wrong tax code because of changing jobs, for example. Over 90% of UK businesses admit to making payroll errors every month, leading to thousands lost every year.  

An employee will only find out if they’ve underpaid or overpaid tax at the end of a tax year, after which HMRC will send a letter, known as a P800. These letters are sent out from June of the following tax year, so it can take some time before finding out if there’s an issue. The letter will tell the employee how to get a refund on overpaid tax or how to pay outstanding taxes owed. 

Usually, this can be done automatically by collecting owed taxes from their payslips in the subsequent year, while claiming a refund for overpaid tax can be done online. However, since April 2024, getting a tax refund via PAYE is no longer automatic and employees have to actively pursue a claim.  

Another type of HMRC communication on income tax discrepancies is known as a Simple Assessment letter, sent out if taxes are owed that exceed £3,000 or that can’t be automatically taken out of an employee’s income as normal. 

Refunds generally happen due to a change in circumstances sometime during the financial year, such as overlaps in leaving or starting a new job or gaps in employment. 

Underpaying tax can happen due to things like earning money outside of your usual employment or being put on an emergency tax code. 

Tips for employers managing PAYE

Managing PAYE as an employer can be done in a couple of ways, both manually and automatically through payroll software. While your payroll systems will take care of running the calculations, it’s good to have an idea of how PAYE works so you’ll be able to recognise errors if they happen. 

• Make sure your tax codes are accurate – The core of PAYE is using an employee’s tax code as provided by HMRC. This code dictates how much income tax an employee is liable for, so long as the information held by HMRC is correct. As an employer, you’ll be notified about any changes to an employee’s code. Applying the correct tax code is critical for an employer, so make sure your records are always up to date. 
• Use reliable payroll software – Payroll can be done in-house either manually or using payroll software, or you might outsource it to a provider. Either way, you’re legally responsible for completing PAYE tasks as part of doing payroll. Using a reliable and integrated payroll software system will make this much easier. 
• Keep up to date with RTI submissions – Payroll comes with submissions to HMRC, known as Real Time Information (RTI). This includes the Full Payment Submission (FPS), made every time you pay an employee. It’s vital you keep on top of these and pay them on time or you can be landed with fines. 
• Provide clear communication to employees – As with most aspects of managing a workforce, communication is key. Providing your employees with prompt information on pay is critical to maintain trust.

How Employment Hero can help 

Managing tax codes, PAYE, RTI and everything else that comes with payroll can take over your work life – but it doesn’t have to. Using Employment Hero’s payroll services can make staying compliant simple and scalable. Whether you’re just starting out or your business is growing to new heights, we have the solution to suit your needs. 

From payroll software to outsourcing, we can make payroll effortless. Talk to us today to find out how.  

The UK’s Autumn Budget 2025 contained several measures aimed at small and medium-sized enterprises (SMEs).

This article summarises the impact for these businesses and their owners, and what actions you may need to take.

The Budget and policy papers are available, but good advice is to consult professional advisers for guidance on how the changes will affect your circumstances.

Here’s what we discuss in this article:

Wages, including statutory rates

Headline rates of Income Tax, National Insurance contributions (NICs) and VAT are unchanged.

However, the government has frozen Income Tax and equivalent NIC secondary thresholds for employees and the self-employed at current levels for a further three years, from April 2028 to April 2031.

Therefore, while you should always consult the P9X ahead of payroll year end, it’s not going to throw up any surprises for 2026.  

From April 2026, business will need to pay higher National Minimum Wage (NMW) and National Living Wage (NLW) hourly rates, as follows (according to the usual age brackets):

• For those aged 21 and over, the NLW will rise by 4.1% to £12.71.
• For those aged 18 to 20, the NMW will increase by 8.5% to £10.85.
• For those aged 16 to 17, or who are within government-approved Apprenticeship schemes, the NMW will go up by 6% to £8.

Also of note is that the accommodation offset will increase by 4.1%, to £11.10 per day.

Businesses may need to adjust FY26 salary and growth planning in light of this.

Lucy Cohen, president of the Association of Accounting Technicians (AAT), says National Living Wage rises are likely to present a challenge to growing companies—especially combined with the increases in employer NICs from the 2024 Budget.

There might be a knock-on effect for managers’ pay, she says:

“If junior workers are paid more, managers may also want more to take on the extra responsibility. So, some scaling businesses will need to consider whether to also hike managers’ pay, or whether they’re happy with a smaller differential.”

Making Tax Digital: Soft landing period is back, plus other tweaks

To ease the transition to Making Tax Digital (MTD) for Income Tax, the government has announced it will not penalise late submissions for quarterly updates during 2026/27, the first year when MTD is implemented.

This only affects the quarterly updates. The yearly digital tax submission, due by 31 January, could still attract penalties for late submission.

Known as the “soft landing period” when the earlier MTD for VAT scheme was rolled out, this partial year-long reprieve is intended to reduce pressure on millions of sole traders and landlords as of April 2026, as they introduce new processes to comply with MTD.

However, the government also said it will increase the penalties due for late payment of Self Assessment and VAT from April 2027. It will apply the new penalty regime for late submission and late payment to all Income Tax Self Assessment taxpayers not already due to join the new system from 6 April 2027.

It will also exempt one small taxpayer group from MTD for Income Tax, and defer the start date for some others to April 2027. More details will follow, the government said.

Help for apprenticeships

The government is making over £1.5b available for investment in employment and skills support.

This funds £820m for the Youth Guarantee, which includes a guaranteed six-month paid work placement for eligible 18 to 21-year olds who have been on Universal Credit and looking for work for 18 months.

The funding also includes £725m for the Growth and Skills Levy to support apprenticeships, including fully-funded SME apprenticeships for eligible under 25s and other changes to streamline apprenticeships.

Businesses keen to nurture young talent would be wise to investigate these schemes, because they offer benefits for both employer and employees.

Gemma Gathercole, strategic engagement lead, England at ACCA, welcomes the changes to apprenticeship funding for SMEs as an important step to taking on younger employees. However, she pointed out that funding for over 21s will be removed from January 2026, potentially limiting the impact for businesses.

Pension salary sacrifice limit

The total amount that can be salary sacrificed in employee wages for pension contributions is presently tax and NI-free.

From 6 April 2029 the government will cap the amount that can be salary sacrificed in pension schemes without paying employer and employee NICs.

The cap will apply at £2,000 per employee, per year. Other pension tax reliefs were unchanged, meaning tax relief at source—which has the biggest impact on pension payments—will continue to be applied.

Yogesh Dhanak, senior technical advisory manager at the Association of Chartered and Certified Accountants (ACCA), says the result could be increased NIC payments for employers.

Many employers currently add the NICs saved into their employer pensions. However, those that don’t—and currently pocket the NIC savings—will have to pay these as part of PAYE as of April 2029.

Helen Wood CA, Technical Content Writer at TaxAssist Accountants, says pension contribution salary sacrifice schemes have been popular as an efficient way for SMEs to attract and retain employees.

“They allow employees to give up some of their salary in return for their employer making a larger pension contribution, saving employee and employer NICs.”

However, the 2029 change impacts higher paid employees more.

As a first step businesses should audit their workforce to get a general idea of the likely impact. A care home business comprising a majority of National Living Wage employees is likely to be lightly affected, for example, compared to a business such as a consultancy, where employees may use salary sacrifice payments as a method of tax reduction. 

These changes will require adjustments to PAYE software. Speak to your software vendor ahead of time. Cloud payroll software will be automatically updated, although you will still have to make the adjustments for each employee if they wish to change their arrangements.

In a survey of Pensions UK members, 75% said savers will likely do this as a result of the changes.

Zoe Alexander, executive director of policy and advocacy at the organisation, offers advice: “Applying the changes from 2029 should give businesses time to prepare. We urge them to consider how they can maintain the generosity of their workplace pensions.”

Supporting the high street

The government announced a package of measures intended to support high street businesses, as follows:

• Removing customs duty relief on low-value imports (under £135) that unfairly advantaged online retailers, and reforming the way these goods are declared into the UK.
• Exploring planning reforms to support growth in high street businesses.
• Introducing permanently lower business rates for retail, hospitality, and leisure (RHL) properties. The RHL multipliers will be 5p below their national equivalents.

To fund this, a higher rate (2.8p above the national standard) will be applied to properties with rateable values of £500,000 and above, representing around 1% of properties

The government is also expanding the Supporting Small Business scheme to businesses who were eligible for RHL relief, in a bid to protect independent pubs and shops.

E-Invoicing for VAT

The Budget included an announcement that e-invoicing will be required for all VAT invoices for business-to-business (B2B) and business-to-government (B2G) transactions from April 2029.

Fuller details will follow next year in the 2026 Budget, including a roadmap for rollout.

An e-invoice is generated in software. Although it has the same purpose as any other invoice, it is a structured data file, enabling the recipient’s system to automatically interpret and handle it.

Essentially, e-invoicing both digitises and standardises invoices, and there’s been a huge push worldwide to embrace the technology, including in the European Union, where e-invoicing for VAT is already a requirement in several countries and will be mandatory by 2030.

This streamlined approach can significantly improve how invoices are sent and received, enhancing efficiency for organisations ranging from businesses to public services such as the NHS. Tasks such as reconciliation can be entirely automated, for example, because there’s no longer a need to use technology such as AI to try and determine where details are listed within ordinary printed or PDF invoices.

E-Invoicing requires software but the groundwork for VAT has already been completed in the UK thanks to Making Tax Digital for VAT, introduced back in 2019, that legally mandated the use of software for VAT accounting. For businesses using cloud accounting software, this will be an automated feature update that will arrive well ahead of the deadline.

However, any businesses resisting the government’s push to entirely digitalise their accounting will find it increasingly harder to stick to the likes of time-honoured receipt and invoice pads, for example. Instead, they should consider invoicing using accounting apps on a mobile phone onsite when a job is completed, for example. E-Invoices can feature useful tools such as Pay Now buttons, or QR codes to allow people to make instant payments. This can significantly boost cash flow.

Business and property taxation, including dividends

Corporation Tax sees no increases. However, penalties see an increase, with the government announcing it will double the penalty for submitting a Corporation Tax return late from 1 April 2026.

This means the £100 fine for being a day late becomes £200, for example, and the further £100 applied at three months becomes £200.

When it comes to transport the key announcements were:

• The 5p fuel duty cut is extended until the end of August 2026, with duty gradually returning to March 2022 levels by March 2027. The planned retail price index (RPI)-linked increase for 2026/27 was cancelled.
• Vehicle Excise Duty (VED) for cars, vans, motorcycles and heavy goods vehicles (HGVs) will rise in line with the RPI from 1 April 2026. The government will also uprate the heavy goods vehicle levy in line with the RPI from 1 April 2026.
• The government will uprate the Van Benefit Charge and Car and Van Fuel Benefit Charges by CPI from 6 April 2026.
• Electronic or hybrid vans, buses, coaches and HGVs will not be included in the new electric Vehicle Excise Duty (eVED) for electric vehicles (EVs), which will see charges of 3p per mile as of April 2028 (and 1.5p for plug-in hybrids). The government says this is because the transition to such vehicles is “currently less advanced than for cars”.

Business rates multipliers in England are reduced from 1 April 2026:

• Small business multiplier falls from 49.9p to 43.2p.
• Standard multiplier falls from 55.5p to 48p.

The government is raising taxes on property and dividend income, to “help to close the gap between tax paid on work and on income from assets”. The 2025 Budget creates separate property income rates taking effect as of 6 April 2027.

• From April 2027, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%.
• The ordinary and upper rates of tax on dividend income will rise 2% from 6 April 2026. The additional rate will not change.

Cohen says SME owners paying themselves dividends will be affected by this increase: “However, in the right scenario, having a limited company is still an attractive option for many.

“It gives so much flexibility in how you pay yourself and when, for example when you take dividends and use benefits such as pensions, compared to being a sole trader.

“Plus, it has the legal protections of limited liability.”

Dhanak adds, in response to the dividend tax rises: “We recommend reviewing your salary and dividend mix to ensure it’s the most efficient, and optimising your use of other benefits and reliefs available such as pensions.”

The government will also abolish the dividend tax credit for non-UK residents with UK income, aligning their treatment with UK residents.

Furthermore, the government will require taxpayers to actively claim incorporation relief for transfers of a business to a company on or after 6 April 2026

Starting from November 27, 2025, UK Listing Relief will provide an exemption from the 0.5% Stamp Duty Reserve Tax on company securities for a period of three years following their listing on a UK-regulated market.

HMRC will receive new powers and will spend £59m to close the tax gap including real-time digital prompts for VAT and Corporation Tax. These prompts will appear in software used to file tax returns, such as cloud accounting apps.

Prompts for VAT will begin as of April 2027, and those for Corporation Tax will begin as of April 2028.

HMRC will consult in early 2026 on ways VAT and PAYE liabilities can be paid promptly, including requiring more Direct Debits.

It will also look for ways to improve systems integration, including the automatic transfer of sales and purchase data into accounting software.

Cut to Employee Ownership Trust relief

Effective immediately as of the Budget announcement, the government is restricting Employee Ownership Trust (EOT) Capital Gains Tax (CGT) relief, from 100% to 50%.

An Employee Ownership Trust is a legal structure that allows a company to be owned collectively by its employees through a trust. In the UK, it was defined and incentivised back in 2014 by the Finance Act.

Unfortunately, the government says this relief has cost 20 times the original estimate in 2013.

Amy Reynolds, tax partner and head of share schemes at Forvis Mazars, says: “These arrangements are often helpful where employees do not immediately have the funds to acquire the business. The restriction may result in more businesses being sold to third parties in preference to EOTs.”

Expansion of EMI, EIS and VCTs

Chancellor Rachel Reeves says tax incentives have supported start-ups, but scheme limits restrict them during the critical scale-up phase.

To address this, the government is significantly increasing company eligibility limits for the Enterprise Management Incentives scheme (EMI), allowing scale-ups to offer tax-advantaged shares to the talent they need to grow. The government also increased the Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) limits to allow investors to follow-on as companies grow.

However, to balance the tax relief offered by VCTs compared to EISs, the government hasreduced upfront VCT Income Tax relief from 30% to 20%.

Supporting AI adoption

The Budget contained two measures to boost AI adoption.

The first is to introduce so-called AI champions who will drive adoption across the UK’s eight industrial strategies.

The second is to expand Innovate UK’s BridgeAI, which offers funding and support for innovators looking to adopt AI.

The use of AI is increasingly common within accounting software, for example, where it’s not just transformational but is bringing in a new era of productivity.

Sage Ai is found within Sage products and is built on decades of expertise and proprietary data. It powers models and services customised for small and medium business finance, ensuring accuracy, security, and relevance no generic AI can match.

It can be found in Sage Copilot, the trusted AI productivity assistant, helping businesses get work done faster with real insights, fewer errors and less admin.

The real world results are clear: businesses get paid seven days faster with Sage Copilot. Furthermore, features such as the VAT assistant alerts you when deadlines are approaching, checks your books for mistakes and calculates how much VAT you owe.

If you haven’t investigated AI within accounting then it’s time to do so.

Writing down allowances

From April 2026, the government will decrease the main rate of writing down allowances by four percentage points to 14%.

Writing down allowances are capital allowances that let you deduct a set percentage of specific asset values from your annual profits.

To encourage investment and growth, the government will introduce a permanent 40% first-year allowance for main‑rate assets, from 1 January 2026.

It’s also keeping the £1m Annual Investment Allowance on plant and machinery equipment.

Final thoughts and next steps

The next step will be to get help from professional advisers on how all the Budget changes impact your business; and how you can address the challenges and grasp the opportunities in the coming months.

Creating a schedule of deadlines and enforcement dates for new measures should help you and your staff stay well prepared.

It’s critical to ensure your plans for FY26 take all the 2025 Budget measures into account to ensure a successful year ahead.

If you’re self-employed, allowable expenses can reduce your Self Assessment tax bill.

In this article, we talk about what you can and can’t make a claim for.

Here’s what we cover:

What’s MTD for Income Tax and how does it affect Self Assessment?

HMRC may have written to you recently about Making Tax Digital (MTD) for Income Tax. The letter will have explained that you need to use MTD as of April 2026, instead of using Self Assessment, as you do now.

MTD changes how you report your income tax to HMRC. It requires you to:

• Keep digital records
• Make quarterly updates (e.g. every three months) to HMRC for every business you run as a sole trader (including property letting)
• Submit a final digital tax return by 31 January, much as you do now.

However, nothing else about income tax changes, and the advice below still applies—you will still need to consider your expenses and income to arrive at your tax bill.

The difference is that you will now need to record and then provide this information via MTD-ready software.

Here’s some of our articles explaining everything you need to know about MTD for Income Tax:

If you start using MTD for Income Tax as of April 2026, then 2024/25’s Self Assessment tax return—due by 31 January 2025—will be the penultimate Self Assessment tax return you submit.

You will then submit one more—on 31 January 2027, for 2025/26—after you have begun following the MTD for Income Tax rules for the 2026/27 tax year.

Income tax relief: How you can reduce your tax by claiming on business expenses

As a sole trader or freelancer, it’s crucial to understand your basic allowable expenses—even if you’re paying an accountant to help with your tax return.

You can claim tax back on some of the costs of running your business—what HMRC calls allowable expenses. These appear as costs in your business accounts deducted from the profit you pay tax on.

Expenses can reduce the average sole trader’s tax bill—often significantly.

For example, if your turnover is £80,000 and you claim £20,000 in allowable expenses, you only pay tax on the remaining £60,000—a substantial saving.

You can also use simplified expenses.

These flat rates allow you to quickly calculate tax relief on vehicles, working from home and living on your business premises.

It can make working your expenses significantly easier.

On the Gov.uk website, you can find the most common expenses you can claim for self-employed and the most common expenses you can claim for if you rent out a property.

Read more on Self Assessment:

Self-employed allowable expenses list

Below, we cover some of the things you can claim for. To reiterate, we assume you’re using cash basis accounting, as the rules for traditional accounting can be slightly different.

You can add these figures to your Self Assessment tax return.

Office equipment and tools

You can claim expenses for business equipment such as laptops, PCs, printers, and computer software subscriptions.

You can usually claim tax back on small tools used in the business, too.

Stationery and communications

As well as the usual paper, envelopes and pens, you can also claim back tax on postage and printing, including the costs of printer ink and cartridges you use as part of your business.

With more businesses now trading online, this allowance also applies to electronic communications – so you can claim tax back on your business phone, mobile and internet bills.

Phone and internet

If you use your phone, mobile and internet for personal and business use, you’ll need to demonstrate a realistic way of dividing the costs and can only claim tax back on the part for business use.

You can’t claim any tax back if you can’t show this.

Professional and financial services

If you get advice from an accountant, lawyer or other professional as part of your business, you can claim tax back on their fees.

You can also claim allowable expenses for hiring surveyors and architects for your business—not for personal home improvements.

If you have a business bank account, you can claim tax relief on bank, overdraft and credit card charges or interest on business loans.

You can also claim tax back on hire purchase, lease, or other financial payments for equipment you use in your business.

Staff and employee costs

You can claim tax relief on employee and staff salaries, bonuses, pensions, benefits, staff and employee costs, agency fees, subcontractors, and employer’s National Insurance contributions.

Travel costs

You can claim allowable expenses if you need to travel for business, including train, bus, taxi, airfares, and accommodation costs.

This does not include to and from your regular place of work, although temporary workplaces are allowed.

The claim can only apply if the primary reason for your journey or stay was for business.

If you take a trip that combines business and pleasure, you can only claim tax relief on costs you can show are separate from the private part of your journey.

If you can’t split up the costs, you can’t claim tax relief on any part.

Car and vehicle costs

If you use a vehicle as part of your business, you can claim tax relief for expenses such as petrol, insurance, and repairs.

Mileage allowance

As a self-employed person, you can add up all your motor expenses for the year and work out the separate business element of the total cost.

However, keeping track and working this out takes time and effort.

Instead, you can claim mileage allowance, a simplified expense that lets you calculate the costs of running your vehicle.

But you must choose one or the other methods, and you can’t switch between them.

Other vehicle-related areas you can claim expenses on include:

• Congestion and low-emission zone charges
• Parking
• Breakdown cover
• Hire charges.

Again, tax relief only applies to these if they are business rather than private expenses.

You can’t claim tax back on parking fines or other fines incurred while driving. There’s no tax relief for breaking the law.

Food and clothing

Everybody needs food and clothing, but claiming for them on expenses depends on what you’re using them for.

Clothing

Generally, you can’t claim for clothing if you’d wear it as part of an everyday wardrobe. So, even if you’ve bought a suit for work, you can’t claim for its cost.

But, if you must buy a uniform that identifies what you do or needs special protective clothing to do your job, you can claim for that.

You can’t claim for non-uniform items such as shoes and socks, although safety boots and specialist protective footwear are allowable.

If you’re an entertainer, and the clothes you’re buying are a costume for a stage, TV or film performance, then you can claim tax relief on those.

Clowns, magicians, acrobats and Elvis impersonators – we bet HMRC enjoys reading your clothing claims!

Laundry

If you wear a uniform or special protective clothing, you can claim expenses if you wash, repair, or replace it.

Food

You can only make a claim on food and drink if it’s wholly a business expense, meaning it must be outside your usual working routine, such as a business trip.

It must not be habitual e.g. a regular lunch event.

Stock and materials

You can claim tax back on the following:

• Items that you resell, such as stock
• Raw materials that you use to make goods for sale
• Direct costs from producing goods.

Marketing and advertising

You can claim tax back on the costs of advertising and marketing your business, including costs for hosting and maintaining your company website.

But beware, you may think that treating a customer or supplier to lunch is ‘marketing’, but HMRC considers it as ‘entertaining’, which you can’t claim tax back for.

If you’re a member of a professional trade body or organisation as part of your business, you can claim tax relief on your membership fees. Subscriptions to trade or professional journals are also allowable expenses, so claim for those.

Pension contributions

Contributions to your pension are not a business expense, so they don’t affect your self-employed profits. However, you are eligible for tax relief on any contributions you make, which you can claim on your tax return.

What expenses can I claim when working from home?

As a sole trader, you may run your businesses from home.

In this case, you can only claim tax back on the proportion of those expenses that relate to the space you use for your business, including heating, electricity, and council tax.

Only the interest portion of your mortgage payment is allowable, not capital repayments.

You’ll need to find a realistic way of dividing the costs.

You may divide your bills according to the number of rooms you use for your business or your time working from home.

How can I track my allowable expenses?

You should track your business expenses throughout the year and keep organised records. If you are unincorporated or a sole trader, you must keep records for five years after 31 January of the relevant tax year.

Ideally, you’d use accounting software, which saves time and is more accurate than spreadsheets.

It should let you import expenses and receipts—if you have paper receipts, you can often snap and capture them digitally.  

How do I claim my self-employed business expenses?

You work out what you can claim back and add the details to your tax return.

This process will be easier if you’ve kept your expenses organised (adding them to accounting software will help you achieve this).

And ultimately, it could be a matter of giving a single figure for your allowable expenses or providing a detailed breakdown on your tax return.

Either way, you should accurately work out your expenses in case HMRC comes back with questions.

Final thoughts on allowable expenses

Understanding allowable expenses can make all the difference to your cash flow.

Knowing what you can and can’t claim back makes things much easier come tax return time.

While we’ve covered some key expenses you can claim back, getting support from an accountant or tax adviser can make all the difference here.

Give yourself plenty of time to get your head around your allowable expenses, speak to the experts if needed, and ensure you don’t have to pay more tax than is required.

Frequently asked questions about allowable expenses

How do I distinguish between capital and revenue expenses?

Capital expenses are investments in assets that will benefit your business over a long period. That is to say, they have an enduring benefit.

Revenue expenses are the day-to-day running costs of your businesss.

Understand the difference so you can claim the correct amounts.

If you use cash basis accounting, most capital expenditure is treated as an allowable expense, although there are exceptions such as cars, land, and buildings.

What records do I need to keep for my allowable expenses?

Keep invoices, bank statements, and receipts related to your business expenses. Organise these digitally to make it easier at tax return time.

What happens if I get audited by HMRC?

If HMRC decides to audit your business, you must provide proof of your allowable expenses.

If you can’t provide these records, HMRC might amend your tax return to exclude them, and charge additional tax, interest, and penalties, where appropriate.

Are startup costs considered allowable expenses?

Although limitations or special rules may exist, certain startup costs could be considered allowable expenses.

Is business insurance an allowable expense?

Yes, you can claim business insurance premiums as an allowable expense.

Can I claim costs for business-related education or training?

Generally, you can claim educational expenses directly related to your current business.

However, training costs that qualify you for a new trade are not allowable.

What if I have a side hustle? Can I claim allowable expenses for it as well?

Yes, if you have multiple businesses—each business can have its own set of allowable expenses. You’ll need to keep these separate for accounting purposes.

Can I claim costs incurred before my business officially started?

You could claim some pre-trading expenses, but specific rules and limitations may apply.

Are there special allowable expenses for businesses that are scaling up?

Expenses related to business growth (such as hiring new staff or moving to a larger office) can be allowable expenses. You might need to claim certain other capital expenditures differently.

There are no special tax rules for ‘scaling up’, but many costs associated with growth such as hiring staff, additional marketing, or moving to new premises may be allowable.

However, some expansion-related costs (like buying or improving property or equipment) may be treated as capital rather than revenue.

Editor’s note: This article was first published in December 2019 and has been updated several times for relevance.

Ross Hold’s life changed without warning.

In 2017, he suffered a cardiac arrest while serving as a Company Commander in the British Army.

He survived, returned to duty, and served five more years—until the Army changed its employment terms.

Suddenly, he was medically discharged.

After fourteen years in the infantry, he explains he was “ripped from one world and then thrust into another.”

Ross found his civilian footing through the Pathways Programme, a springboard into tech careers that led him to Sage, where he joined as Business Resilience Manager before being promoted to Director of Corporate Security and Resilience.

Here at Sage, he met two others who understood the dislocation of transition:
Mark Hendry MBE, who served twenty-three years in the Royal Engineers, and is now our Director of Colleague Performance, and Andy Heaton, who had served eleven, who now is our Director of Strategy and Execution.

Three Directors. Between them: forty-eight years of military experience.

They know how deeply people depend on one another when working side-by-side for long stretches of their lives.

Their time in uniform had given each of them a simple strategy for navigating new terrain: look out for those around you.

It didn’t take long for those instincts to surface again in their new positions—the urge to gather people, steady each other, and build something that could help others find their footing too.

“We knew there was a lot of veterans within Sage, and we wanted to create a space where we could talk about transition and create a sense of camaraderie.”Mark explains.

They worked together to create the Veterans Colleague Success Network—a dedicated space where veterans and other colleagues connected to the Armed Forces could gather to support each other in a community bonded by a sense of belonging and the power of shared purpose.

The business of belonging

From Google’s deep analysis of high-performing teams, to Gallup’s studies of millions of workers, and MIT’s behavioural mapping of workplace interactions—the same pattern keeps surfacing:

The quality of relationships between coworkers is one of the most powerful predictors of performance we have.

These studies show that teams built on trust consistently produce more prosperous results: greater retention, happier customers, and significantly more profit.

Gallup found that those who report having a “best friend at work” are seven times more likely to be engaged in their position.

Google discovered that the highest-performing workplaces were those built around psychological safety—environments where coworkers could speak openly, take risks, and depend on one another delivered superior outcomes overall, consistently outpacing talent-only teams.

MIT’s research revealed that thriving units share specific social dynamics: frequent informal check-ins, balanced turn-taking, energetic face-to-face communication, and dense webs of side-conversations that knit people together.

These findings point to a simple conclusion:

Colleague cohesion is the central mechanism through which companies succeed.

Belonging is fostered when folks feel they have a place.

Mark remembers his turning point vividly: “In the early days, I made the mistake of almost trying to morph myself into a civilian, when actually what my team have helped me do is say, well, actually, the skills you bring from the services—that’s why you’re here.”

Camaraderie is the closeness that grows through shared moments of connection.

Belonging roots us, and camaraderie binds us to one another.

Lesson one: Mutual Reliance is more powerful than individual resilience

Modern workplaces often celebrate individual resilience.
Push harder. Bounce back. Hold it together.

But the veterans at Sage learned something very different long before they arrived in corporate life: it’s not the lone individual who endures—it’s the group. Not grit alone, but the people around you.

If you want to understand mutual reliance, you only need to look at what happens when people choose to do something difficult together.

In August 2025, the three of them—Ross, Mark and Andy—along with around twenty other colleagues who joined for parts of the route, decided to take on a challenge many would consider impossible:

Running the full 106 kilometres (65 miles) of Hadrian’s Wall in a single day, to raise money for The Not Forgotten, a charity supporting wounded and sick veterans.

In the run up to the event, Andy grins when he talks about it:

“I’ve always liked to challenge myself, that comes from a bit of that military type-two fun.”

It’s a habit he never unlearned—the instinct to lean into difficulty.

But he knew that the heart of the challenge wasn’t really the enormous mileage.

When people take on something hard together, the real test is whether the group can carry one another through the moments where any individual falters.

That shift from private endurance to shared effort—the “me” to “we”—is exactly what Ross names:

“Everyone’s going to have a bad moment on the run, you need the support, the camaraderie: it’s about the team.”

This is the lesson the military teaches better than any leadership book: people endure more, and do more, when they’re able to lean on one another.

Sociologists call this mutual reliance.
Psychologists studying high-performing groups call it interdependence.
In military doctrine, it’s the foundation of unit cohesion.

In business it’s the engine behind high-performing teams.

Lesson two: Prosocial Motivation fuels high-performing cultures

One of the most consistently replicated findings in organisational psychology is that people work harder and stay longer when their effort benefits someone else.

This is prosocial motivation—the instinct to contribute beyond oneself.

In many corporate environments, purpose is often framed as something personal: find your purpose, own your purpose, what motivates you?

The military treats purpose as collective.

You work toward the same mission, and your actions matter because they support others.

Motivation is anchored in interdependence, not individual goals. People show up for the person beside them.

That shared orientation carries directly into the Veterans Colleague Success Network at Sage.

It reflects the instinct these veterans lived with for years: if you’ve walked a hard road, you help the next person walk it with less friction.

You can hear it in the way they describe the Hadrian’s Wall challenge. While the distance was an extraordinary personal test, the meaning was collective.

This mission was a way of raising money for charity, a purpose beyond the self, expressed through shared effort.

It’s fitting that the charity they chose, The Not Forgotten, reflects the same ethos. It focuses on reducing isolation by creating social connection, supporting more than 10,000 sick or injured veterans and serving personnel across the UK.

At the heart of TNF’s mission is restoring community: giving people living with lasting injury or illness the chance to feel part of something again. Day-trips, respite breaks, challenge holidays, concerts, lunches and events are offered free of charge for beneficiaries, who are bonded by these experiences.

Prosocial motivation is a persistent predictor of long-term organisational health, far more powerful than individual ambition alone.

When people are working for something larger than themselves, they carry each other further.

And if prosocial, community-oriented behaviour becomes your company norm, the culture naturally shifts to sustain it.

Lesson three: Connection thrives where structure exists

In many workplaces, belonging is left to chance, unplanned and assumed to arise on its own.

Veterans understand it as something far more deliberate—it’s a structure you build, a rhythm you keep.

In the military, connection is engineered into the day.

Morning check-ins. Shared routines. Informal rhythms. Predictable rituals. A common language that makes coordination effortless.

These elements are implemented structurally; the sentimentality is a bonus.

They create the conditions in which people can steadily settle into the identity of the group.

And the value of shared routines and rituals isn’t confined to the military. Any organisation can use these structures to create steadier, more connected teams, if it chooses to.

That recognition from Ross, Andy, and Mark was what shaped the creation of our Veterans Colleague Success Network.

For leaders, this is the practical lesson veterans offer:

Camaraderie can be cultivated with a system. Community-minded cultures create continuous-growth companies.

It compounds when rituals give colleagues built-in touchpoints for belonging.

When leaders design these structures—even modest ones—something powerful happens. Connection stops being an aspiration and becomes part of the organisation’s operating system.

And over time, that system begins to behave like a living organism: Knowledge moves through it like circulation, reaching the places it’s needed without silos. Support becomes reflexive—people step in before anyone has to ask.

New members are folded in quickly, stabilised by patterns that show them how things work and who they can turn to. Cohesion spreads outward, drawing people in at the edges until the whole organisation feels connected by the same pulse.

This is the deeper lesson the veterans carry with them into corporate life:
belonging isn’t the by-product of a good culture—it’s the outcome of deliberate design.

Veterans Colleague Success Network

At Sage, the Veterans Colleague Success Network supports more than our internal colleagues — it extends outward. Our veterans mentor and advise small businesses like British Veteran Owned (BVO), creating a pay-it-forward cycle of veterans helping veterans start and grow their own ventures. It’s service multiplied through community.

Read BVO’s story

Accountants and bookkeepers surely don’t need anybody to remind them that Making Tax Digital (MTD), HMRC’s digital transformation programme for the tax system, reaches a new milestone in April 2026 when it expands to cover Income Tax.

But what if your practice planning isn’t where you’d like it to be?

Or what if you just want to check to ensure you’re doing things right and haven’t missed anything out?

That’s what this blog is all about. Here’s what we discuss:

MTD: The next frontier for accountants

MTD for VAT was made mandatory in 2022 and, with lessons learned, it’s now being rolled out to Income Tax.

The first hurdle for many firms is client communications.

“Awareness has definitely grown since marketing campaigns from both the HMRC and software firms have increased,” says Ryan Anderson of accountants DJH Business Advisors. “But understanding remains surface-level for most affected taxpayers.

“The majority know that ‘something’s changing’ but few truly understand what MTD will mean for them day-to-day and that could build into a sizeable issue for companies in the UK.”

“There is also a need to balance MTD against existing workloads, given that the first submissions will coincide with the beginning of the 2025/26 tax return season—so resource planning and clear communication, both internally and to clients, are key.”

Even if, as an accountant or bookkeeper, you’re aware that this deadline is looming, your clients might not be. You may well have a lot on your plate with Self Assessment work both now and in January.

So, how do you ensure that you and your clients are ready for MTD for Income Tax?

The 4 basic steps to prepare for MTD for Income Tax

Essentially, according to HMRC there are four steps.

First, you need to work out a client’s qualifying income: above £50,000 for the first wave of MTD for Income Tax as of April 2026, then £30,000 as of April 2027, and £20,000 as of April 2028.

Then you need to find out if and when they need to use Making Tax Digital for Income Tax. Digital exclusion rules apply, and there are also some automatic exemptions.

If they do need to use MTD, then thirdly, you’ll have to create an agent services account (ASA) if you haven’t already, before finally buying in the right software.

Some clients might take a do-it-by-myself approach. Others might fall into the do-it-with-me category and will therefore require some help.

You might also have some do-it-for-me clients—those that simply do not or will not use software.

Surprisingly, you can still work with these clients in a post-April MTD landscape.

With this latter group you can use AccountsPrep, an AutoEntry add-on for accountants and bookkeepers that makes reconciliation for non-digital clients quick and easy.

You can use AutoEntry to scan and upload bank statements, or other files like receipts and bills, and then import them directly into AccountsPrep, to then create accounts literally in minutes, ready for import to final accounts software for MTD submission.

Those using AccountsPrep report it can turn days of work into hours. This level of automation and time saving is going to be vital considering quarterly update schedules for all your clients.

Choosing the right technology

As the digital part of the name suggests, MTD is essentially all about automation.

You’ll need to check that you’re using the best technology to speed up processes, ensure compliance, keep costs down and, very importantly, reduce the risk of errors.

Needless to say, artificial intelligence (AI) can help here.

Sage, for instance, has recently launched the UK’s first MTD for Income Tax Agent, tech that will transform quarterly updates into a single, end-to-end workflow for you.

More importantly, it acts like an additional member of staff keeping an eye out for problems and reminding you about deadlines and what you need to do next.

But you need to be ready to consider a range of technologies.

Manual processes are not just outdated. They’re now completely inappropriate.

It’s essential, though, to choose systems that integrate with each other to comply with digital linking rules, which are unchanged from MTD for VAT. It’s still difficult if not nearly impossible to use spreadsheets without breaking the copy and paste prohibition—which literally means you’re breaking the law.

And to move from paper to digital, you’ll need to think about what you want to achieve in your digital transformation and then find the best technology.

MTD compliance and integration should be one key outcome. You might also want to decide whether benefits such as speed and cost cutting are also important to you.

“MTD will require approved software,”says Jeremy Kitson, a director at Prime Accountants Group. “So we need to migrate clients onto software where they’re not currently using a software package.

“This comes at a cost in terms of subscription prices which are relatively inexpensive but also training time. Not everyone is used to using digital software, or may not be IT literate, so the technology may be daunting.

“There will be a requirement to make quarterly submissions as well as an end-of-year return, so there is an additional administrative burden. However, this can give more up-to-date business information and is an opportunity for business planning.”

Once you’ve chosen the most appropriate combination of technology you can start identifying repetitive manual tasks that can be automated before scanning and storing paperwork in the cloud.

You might want to start with one client and use this as a test run—it’s a good way of making sure that your technology integrates with your client’s systems.

It will also allow your clients to get into the habit of using digital technology and digitising their systems. Ensuring that both clients and your own teams understand why and how you’re digitising systems and records is essential.

Anderson says he’s communicating the following to clients about tech systems: “Try the mobile app first. By having access to your records via your phone, you can easily make your bookkeeping part of your lifestyle. Snap a receipt, or send an invoice in seconds, rather than tackling a mountain of paperwork each quarter.”

Managing clients and negotiating fees

Another important issue that you’ll have to discuss with clients is your fee.

Given that the work you’ll be doing for your clients will be changing you might want to suggest that you switch from fees to a retainer.

Technology can help here. Sage’s GoPropoal allows you to create a proposal and letter of engagement for a client with fees that are not only transparent but that work for you and for them. It also allows you to standardise pricing, which can really impact your bottom line.

Does this change mean that you’ll have to drop clients who might struggle with MTD or might not find it directly relevant?

The answer here is no, as this isn’t like MTD for VAT. You can still retain your do-it-for-me” clients. Again, AccountsPrep is a unique and vital solution for this.

On a practical level, they just need to sign their digital tax return, which can be done just as you do it now—perhaps digitally signing in response to an email request you send.

You can still support them in other ways, including quarterly updates and reconciliations even on a daily, weekly or monthly basis. However, the increased work here will obviously impact the fees you charge. You certainly can’t continue to apply the same pricing as for the once-yearly Self Assessment work.

James Mitchell, Head of NCA at Sage business partner Acuity24 recommends a phased approach to managing clients: “Start by segmenting clients according to their readiness: who already uses compatible software, who relies on spreadsheets, and who still works manually.

“For clients still using manual systems, focus on adopting digital-first processes and compatible tools that make MTD compliance simpler. Offer guidance or check-ins to help clients feel confident using these processes; adoption is as much about reassurance as it is about technology.”

The need to take action now

“For accountants themselves, now is also the time to look inward,” continues Mitchell.

“Teams that still rely on manual reconciliations or disconnected systems will struggle to keep up once MTD filing becomes more frequent and detailed. Embracing automation in reporting and record keeping can free up a lot of time to focus on advisory work rather than admin.”

More generally, you might want to think of implementing these changes one month at a time.

In month one, for instance, you’ll want to identify which of your clients falls within the scope of MTD for Income Tax.

By month two you should have thought about choosing the right software platform as well as worked out how you’re going to migrate existing data. This is also a good time to set a budget and start staff training as well as raising awareness of the far-reaching impact of the changes.

“While awareness of MTD has improved in recent times, many business leaders continue to underestimate how much work is involved in truly preparing for it,” explains Vipul Sheth, MD of accountancy outsourcing experts AdvanceTrack.

“Many accountants assume their clients are ‘digital’ because they’re using cloud software. However, that obviously doesn’t mean they’re MTD-compliant. Preparedness is patchy, especially among smaller businesses and landlords.”

The biggest challenge is shifting behaviour, according to Sheth.

“For many clients, MTD for Income Tax means a completely different way of working—moving from annual touchpoints to quarterly updates and being responsible for digital record-keeping.

“For many, this represents a major culture change, and one that accountants will need to guide them through.”

Month three in your action plan should be about starting migration. This involves setting up digital record-keeping, testing transactions and linking client data and submissions.

Finally, in month four you might want to run a test submission, just to check that everything works.

Final thoughts

Accountants need to create a clear timetable of actions. It’s not yet too late to implement a sound MTD practice transformation.

As well as a challenge, you can see MTD as an opportunity to digitise your firm, upskill your teams and even review your whole business strategy.

“The overarching message is simple: don’t treat MTD as a deadline,” says Mitchell. “Treat it as an opportunity. The firms that help clients make the digital leap now will reduce risk later and position themselves as trusted advisors who add real value beyond compliance.”

Accountants and bookkeepers aren’t panicking about AI.

They’re asking sharper questions.

Recent Sage research shows that many UK firms now expect AI to benefit their practice in the next year, signalling a shift from curiosity to confident experimentation.

Across research, interviews, events, and Sage customer stories, five questions keep coming up that define how accountants and bookkeepers approach AI in practice, and reality.

That’s what we discuss in this article, as follows:

1. Where does AI make a difference?

Across accounting and bookkeeping, the first question isn’t philosophical.

It’s practical.

Where do I start? What’s worth automating?

That recent Sage research shows accountants and bookkeepers are expanding their advisory role and experimenting with new technology, often using multiple platforms.

“Leads came in from everywhere—website, socials, referrals—and no one knew what was happening,” said Jeri Williams, founder of Smooth Accounting, speaking at a keynote session at Leaders in Accounting.

Once we used AI tools to automate and summarise calls, everyone could see what was going on. Conversions shot up.

Jeri Williams, Smooth Accounting

Jeri’s story mirrors many others.

Firms are finding wins in automating repetitive, data-heavy workflows, such as onboarding, reconciliation, and disclosure checks, while keeping humans in control of review and advice.

This is agentic AI in action: systems that operate on behalf of humans but always within defined boundaries.

Accountants set the intent; AI executes the repeatable steps. The professional judgment calls, and the “should we?”, not the “how do we?” checks, stay firmly human.

Across UK SMBs, Sage Copilot is automating busywork like drafting emails, chasing payments, and summarising activity, so teams can focus on judgement calls.

At Watson’s Anodising, for example, Copilot runs in the background, freeing hours each week for production and customer service.

2. How do I stay compliant and trusted?

Trust, reliability, and compliance are the top priorities for accountants when recommending software, further Sage research reveals.

While speed and efficiency are valuable, they mean little without a foundation of trust and clear accountability for AI-generated outputs.

Initiatives like the Sage Trust Label exemplify this approach, showing exactly how AI features are designed, what data they use, and how security is maintained.

When barriers to adoption often stem from unfamiliarity and perceived complexity, the key to overcoming them is to highlight the importance of transparent AI policies and robust human oversight.

Forward-thinking firms are formalising these principles into lightweight digital codes of conduct, creating an easily digestible way to build client confidence.

AI isn’t magic. Be crystal-clear where it helps and where you still need human oversight. If expectations are unrealistic, disappointment follows—and people stop using it.

Mohammed Sidat, associate directoR, Wolters Kluwer

What a simple AI policy should cover

Here are some suggestions of what should be included:

Purpose & scope

Set clear intent for using AI in your firm.

Define approved use cases, such as data analysis, draft preparation, or summarisation.

Establish boundaries so everyone understands what’s in scope, and what isn’t.

Privacy & data handling

Clarify how information moves through your systems and where it’s stored, showing how you comply with local and regional data and privacy laws.

Use only vetted tools and never upload client data to public models.

Maintain a list of approved platforms with data-protection notes.

Accountability & human review

Specify who signs off on AI work and ensure human oversight for all client-facing content.

Show clients there are humans in control. The professional using AI remains responsible for accuracy.

Compliance & ethics

Anchor your policy in existing professional standards, including copyright guidance and record-keeping obligations.

Show your tools stay up to date with changing regulations.

Treat AI prompts and outputs like any other working paper—store data safely, provide version-control, and review them often.

Consent & transparency

Show clients how AI fits into your workflow so they can understand where to expect it and how it helps them.

At Smooth Accounting, Jeri Williams added a simple consent line to all meeting bookings after clients questioned the extra “guest” on their calls.

“We just explain it’s our AI note-taker, and they’ve already agreed when they booked. It’s become second nature.”

A one-page policy is quick to draft and saves hours of uncertainty, strengthening client confidence in your commitment to privacy and professional responsibility.

These principles aren’t theoretical. They deliver real results in practice.

Sage customer British Veteran Owned (BVO) reports saving £15,000 and 36 days per year with Sage automation, all while strengthening client confidence through a transparent process.

3. What does this mean for my role?

As AI becomes an integral part of daily operations, your AI-inclusivity and use visibility, is increasingly viewed as a competitive advantage.

The biggest question for accountants and bookkeepers is personal: if AI can handle the admin, what’s next on the list? The answer is up to you, as you’ll have more time to prioritise client care and relationships, or simply finish work on time.

AI gets you 90 percent of the way. That last 10 percent—the context, the empathy, the credibility – is where we earn our value.

Jared Goodrich, director of innovation, Moore Kingston Smith

Walter Dawson & Son, a Yorkshire-based firm, demonstrates how embracing Sage and AutoEntry has freed their team from manual admin and helped them prepare early for the shift toward Making Tax Digital for Income Tax.

The result is more time for client-facing advisory work rather than form-filling and data chasing.

Managing Director Julie Young notes in the success story: “The time saving from Sage and AutoEntry is used back with the clients. It allows us to reflect on the information and talk to our clients more about how they’re performing.”

Walter Dawson & Son accountant Hannah Hall, adds, “Sage Copilot is going to allow us more time to go out and see our clients, listen to their needs, and be more people-facing rather than behind the computer.”

Together, their experience shows how AI and automation free up time for deeper client engagement and strategic advice.

As roles evolve, the opportunity is to move beyond simple automation into tools that amplify your judgment, where you set the direction and technology accelerates the work.

4. How do I go from automation to agency?

You’ve seen that automation saves time.

You know that agency creates value.

Agentic AI connects the two, giving you systems that can act independently, but always under your instruction and with your judgment in control.

This is the shift that turns tools into teammates, moving from assistance to action while keeping the professional firmly at the wheel.

Think of Sage Copilot: it draws from accounting data to draft, suggest, and surface insights, but the practitioner remains at the controls.

You decide the goal. Copilot handles the legwork.

The same principle applies to MTD submissions, reconciliations, or reporting workflows. When professionals set the intent and validate the output, AI becomes an extension of expertise, not a substitute for it.

The new Sage MTD Agent, for example, simplifies compliance by automatically preparing and submitting updates to HMRC while flagging exceptions for review.

This practical example of Agentic AI is built for real-world accounting. It offers automation that works within defined professional boundaries and strengthens human oversight rather than replacing it.

Other Sage Ai Agents—including the new Finance Intelligence, Close, and Assurance Agents—are built to operate autonomously within clear, trusted boundaries. They focus on gathering data, generating summaries, or reconciling figures, then presenting the results for human review.

Agentic AI builds on the foundation laid by Making Tax Digital—moving from simply connecting systems to pre-emptive action, so your software anticipates what should happen next while you stay in control.

For a deeper dive into how this shift is transforming accounting workflows, read our companion piece Authentic intelligence in action: How Agentic AI will shape the future of accounting.

5. How do I start?

Accountants and bookkeepers often say the same thing: the hardest part of AI isn’t using it—it’s starting.

Ease of use, familiarity, and value for money are key factors in sifting through software recommendations, while cost and feature limitations remain common obstacles.

You don’t need a full-scale strategy or a new tech stack—just try one contained experiment to prove what’s possible.

These agentic principles also apply at firm level: start small, act with intent, learn fast.

“Progress beats perfection,” said Mohammed Sidat, speaking in a keynote at Leaders in Accounting. “Try one repetitive task, learn from it, then repeat. You’ll discover what works for your firm instead of waiting for the perfect solution.”

Think of it as your 30-day AI sprint—a safe, structured way to see what human-plus-machine collaboration looks like in your own workflow:

Week 1: Pick one repetitive workflow

Choose one repetitive, measurable workflow—like onboarding, invoice chasing, or disclosure checks—and record your current time or cost baseline.

Week 2: Pilot an automation or AI feature

Test an AI feature or automation using tools you already trust.

As Jeri Williams put it, “Half the time, you’re already paying for AI. You just haven’t switched it on yet.”

Week 3: Add review and consent gates

Decide where human sign-off is required and how client consent is captured.

Week 4: Measure the impact and share the learning

Track the impact—hours saved, quality improved, errors reduced—and share results internally to encourage further experimentation.

Each small experiment builds your firm’s collective intelligence and demonstrates how, by setting intent and AI executing safely, you can deliver real client value.

Final thoughts: The real future of AI in accounting

Accountants who understand AI—its boundaries, biases, and potential—will shape the future of the profession. So, by just getting started, you’re already halfway there.

Throughout history, innovations like double-entry bookkeeping, spreadsheets, and cloud technology have expanded accountants’ agency.

More recently, initiatives such as Making Tax Digital have accelerated the shift to digital workflows, giving accountants greater control and insight over their work.

Agentic AI is the next chapter: where software is your teammate, assistant, or coach, not simply a passive tool.

Accountants and bookkeepers have always led through change; now, AI offers a new way to demonstrate that leadership to your firm and your clients.

Filing your tax return is one of the many important tasks you have to carry out as a self-employed business owner. And the one for 2024/25 is now due, following the end of the tax year in April 2025.

If you’re submitting it via the paper SA100 form, the deadline was 31 October 2025. So, you’ve already missed it. Sorry!

Opting to do it online? Then you’ve got more time—that deadline is 31 January 2026.

To help you get this done on time, and so you avoid a penalty, Jonathan Wingfield from Wingfield Accountancy Services shares seven pieces of tax return advice for self-employed business owners.

Here’s what the article covers:

1. Get into good habits early on

As soon as you start your business, keep accurate, up-to-date records of your income and expenditure as you move through the year.

Using accounting software to automate your record keeping can make life much easier, especially when it’s time to complete your Self Assessment tax return.

2. Carry out a monthly reconciliation

Compare your income and expenditure with business bank statements to ensure your records are correct. In other words, make sure your bank balance as per your records tallies with the actual bank statement.

This will ensure any errors are easily and quickly identified and you can be sure at year-end all the figures you send to HMRC are correct and complete.

3. Complete your tax return as soon as you can

If you realise you are missing some information that is needed to complete your Self Assessment tax return, you’ll be able to save the work you’ve done and come back to completing your return online once you’ve collected the information you need.

You may also want to get Self Assessment tax help from a qualified professional.

And completing your tax return in good time will also mean you’ll know how much tax you owe early enough to budget for the payment. Note that depending on the level of tax you need to pay, you may also have to make payments on account.

4. Don’t be late with your tax return

Make sure you submit your Self Assessment tax return before the deadline.

Any late submissions are likely to result in an immediate £100 penalty and this increases after three months.

You’re also liable for interest on outstanding sums, so it’s better to pay your Self Assessment tax bill on time.

5. Claim all expenses to which you’re entitled

If you’re using HMRC’s online software to do your Self Assessment, these will have their own declaration section as you move through the form online.

It’s wise to know the expenses you can claim for when you’re self-employed before you start filling in the form, especially if it’s your first time.

6. Avoid mistakes and inaccuracies while filing your Self Assessment tax return

Don’t try to claim expenses to which you are not entitled, whether deliberately or not. The penalties for false claims can be severe, as can failure to declare income (which can lead to prosecution).

Using accurate records that are up to date helps to ensure the accuracy of your Self Assessment tax return and bill. Take your time when inputting figures and double-check them.

If you make a mistake on your return, you normally get 12 months from 31 January after the end of the tax year to correct it (called “an amendment”).

7. Get an accountant to do it for you

I would say that–wouldn’t I? There’s no shame in asking for tax return help. An experienced accountant will make sure things are done correctly, promptly, and with far less hassle for you.

In addition, they’ll ensure you claim for everything you’re entitled to claim, which will help to minimise your tax bill.

It’s time to get ready for MTD for Income Tax

In April 2026, income tax for some sole traders and landlords becomes even easier because of MTD for Income Tax.

For sole traders or landlords earning over £50,000 per year from their work or rental property, Making Tax Digital promises to revolutionise how they handle their tax.

In April 2027 the threshold drops to £30,000 and more sole traders or landlords will have to use MTD. Then in April 2028, the threshold drops to £20,000. By that point, a large portion of those previously using Self Assessment will have to use MTD for Income Tax instead of Self Assessment.

Here’s some articles from Sage Advice about getting ready for MTD for Income Tax if you’re a sole trader or landlord:

Final thoughts on completing your tax return

There’s few things better than the feeling of satisfaction that comes from knowing you’ve taken care of your tax for another year.

Putting in the effort sooner rather than later means you can do more of what you love—growing your business and serving your customers or clients. And, as we explain above, it’s actually not that difficult—especially if you get expert help with Self Assessment tax.

Editor’s note: This article was first published in January 2019 and has been updated for relevance.

Do you need to file a tax return online by Self Assessment deadline of 31 January? Does the thought of how to do a tax return online make you quake in your boots? Are you new to Self Assessment and wonder where to start? 

While some people start early and file their tax returns on the first day of the new tax year, if that doesn’t sound like you, don’t worry.  

The easiest way to file a Self Assessment tax return is online because it cuts out postal delays and extends your deadline a little into January. 

Filing it online can seem daunting, especially if you’re not technically minded, but good preparation can make it easier thank you think. It’s worth getting it done a little earlier too, so it doesn’t become too big or too urgent a task. 

If you need to file a tax return, this article will offer some tips on how to fill in a Self Assessment tax return online form. 

We’ll also provide you with details about dates, penalties, and allowable expenses, and look at why many businesses use an accountant. 

That last part is important because we’re not claiming to offer legal or professional advice. If you’re in any doubt, contact HMRC or a tax professional who be able to offer specialised assistance. 

Is it easy to do tax return online taxes? Actually yes, so let’s get started. 

This guide to filing a Self Assessment tax return covers the following topics: 

What is Making Tax Digital and does it affect me?

Making Tax Digital (MTD) for Income Tax will soon replace Self Assessment tax returns for many sole traders and landlords who fall within its scope—although it’s important to note that Self Assessment will continue and still be used by many people.

MTD for Income Tax is being rolled out across several phases. When and if you have to start will depend on your gross qualifying income, as follows:

• April 2026: If your gross qualifying income is over £50,000.
• April 2027: If your gross qualifying income is over £30,000.
• April 2028: If your gross qualifying income is over £20,000.

Anybody outside of this will continue to use Self Assessment.

We’ve covered MTD for Income Tax in-depth here at Sage Advice. These blogs will give you superb explanations of what the requirements are, and what you need to do if it affects you:

Do you need to file a tax return?

For employees and pensioners, tax is typically deducted automatically at source from wages and pensions.  

But people and businesses with other income not deducted at source and above a certain level, like income from shares, collecting rent from property lets, or if you’re a freelancer must report it in a Self Assessment tax return. 

If you were self-employed as a sole trader in the last tax year (6 April 2024 to 5 April 2025) and earned more than £1,000, you need to file a tax return.

This is still true if you have done any additional work around a full time job, like freelancing, or earned more with a side hustle, like selling on eBay, on top of any earnings from a PAYE job. This is regardless of whether your total income exceeds the Income Tax Personal Allowance of £12,570.

You must also file one if you were a partner in a business partnership or director of a limited company whose income is above the Personal Allowance, and which was not taxed at source. Examples typically include benefits or dividends.

Even if your primary income is from your wages or pension, you may still need to send a return if you work in specific sectors, were paid more than £100,000 via a PAYE salary scheme, or have any other untaxed income, such as from: 

• Savings, investments, and dividends 

You can also file a tax return online to claim some income tax relief or prove you are self-employed, for example, to claim Tax-Free Childcare or maternity allowance. 

HMRC offers this decision tree if you are still not sure whether you need to file a return. 

Former Head of Enterprise at the Institute of Chartered Accountants in England and Wales (ICAEW), Nick Levine, offers some further advice: “If HMRC has sent you a notice to file a return, you must complete one. 

“Even if you have not received such a notice, you may still need to file a tax return if you had a new source of income or capital gains in the last tax year on which you need to pay tax—if so, tell HMRC straight away.” 

You also need to register for Self Assessment well before the 5 October deadline after the tax year you’re declaring for.  

So, if you are declaring for the April 24-April 25 tax year, the deadline to register for Self Assessment is 5 October 2025.

Tax return dates and deadlines

Assuming you register for Self Assessment by the 5 October 2025 deadline, for the 2024/25 tax year, there are a few key dates to remember. 

For filing paper tax returns, the filing deadline is midnight on 31 October 2025.  

The online filing deadline is midnight on 31 January 2026. 

Payments on account 

Once you’ve completed your first tax return, in addition to whatever tax and National Insurance (NI) is due for the previous tax year, you may also have to make two payments towards your upcoming tax bill for the current tax year we’re in right now. 

This is known as payments on account, and you’ll have to do it every year moving forward. 

The exception is if your last Self Assessment tax bill was less than £1,000, or you’ve already paid more than 80% of all the tax you owe at source in the previous year (note that underpaid tax collected via PAYE in the following year also counts as being deducted at source). 

The first deadline for paying the tax you owe on account is also midnight on 31 January for the first payment on account and 31 July for the second. 

How to register and file a tax return online

Most tax returns are filed online because, according to HMRC, it’s easy, secure, available 24 hours a day, and you can sign up for email alerts and online messages to help you manage your tax affairs. 

If you’ve not completed a tax return online before, you must register for an HMRC online account. 

When you’ve signed up, HMRC will post you an activation code, which can take 10 working days to arrive—or up to 21 days if you are abroad—so do this well in advance. You’ll also receive a user ID and Unique Taxpayer Reference (UTR). 

If you’ve filed a return before, but not last year, you will need to register again. 

Before applying online for Self Assessment, gather all the information you need in advance. 

You’ll need your UTR, National Insurance number and employer reference if you have one. You may need your P60 end of year certificate, P11D expenses or benefits, P45 details of leaving work, payslips, and/or your P2 PAYE coding notice. 

Now you’re ready to tackle how to fill in a tax return online form itself. (Here is the pdf version of the printed form if you want to familiarise yourself with the sections and information you’re likely to need to supply.) 

You’ll need your bank or building society statements at hand, and if you work for yourself, you will need your profit or loss account, or other business records too. 

The Self Assessment form 

The first section asks for personal details. 

The next asks about where you have received income or gains from, for example, employment or self-employment, a company or partnership, properties, trusts, capital gains, or from overseas. 

Answer “Yes” to any of the boxes in this section to show that you did receive income from any of these sources. This will cause further questions to appear asking about these sources of income. 

The third section asks about income from bank or building society interest, pensions, share dividends, and benefits. It’s important to mention these even if you’re completing Self Assessment because you’re a sole trader. HMRC needs to know about all your income, no matter where it comes from. 

The form then asks for other information such as student loans, pension contributions, gifts, charitable donations, child benefit, and marriage allowances. 

How to fill in your tax return explains all these pages, including supplementary pages, in more detail. 

But if anything is not clear, contact HMRC to ask for help. 

Don’t send any receipts, accounts, or other paperwork to HMRC supporting your Self Assessment return unless HMRC asks explicitly for them. Even then, you should only send copies and keep the originals safe. 

You’re responsible for the information provided, so take your time filling in your information on your return. Enter the figures carefully and double-check everything before you click submit. 

Nick Levine advises: “Fill in as much information as you can on your return. You can save the information you enter on each screen as you go along, allowing you to continue later. 

“You can go back and correct figures at any time before you hit the final submit button. Save a copy of your final return and print a copy of the receipt. 

“If there are significant changes to last year’s return, explain why in the section for further information.” 

Record keeping 

Assuming you file on time, you must keep records of all information used to complete your Self Assessment tax returns—which is to say, your accounts and other information. Self-employed businesses should keep this for up to five years after the 31 January deadline each year. 

A significant penalty can apply for each failure to keep or preserve adequate records should HMRC come knocking at your door. 

Furthermore, you should keep digital or paper copies of all tax return submissions and supporting documentation for at least 5 years after the 31 January filing deadline for that year, as required by HMRC.

Allowable expenses

If you are self-employed, your business will have various running costs.

You can deduct some of these costs to work out your taxable profit providing they are allowable expenses.

These can include:

• Costs of running an office, for example, stationery or phone bills.
• Uniforms or protective clothing – although you generally can’t claim for clothing such as business attire or shoes.
• Staff costs, for example, salaries or subcontractor costs.
• Financial costs, for example, insurance or bank charges.
• Some or all of the fees paid to professionals, such as accountants or lawyers.
• Costs of your business premises, for example, heating, lighting, and business rates.
• Advertising or marketing, for example, website costs (but not entertaining costs, such as buying a client lunch!).

Charlie Walker, a senior partner at TaxAssist Accountants in Bedford, says HMRC’s online filing system will calculate your tax liability, but it will not check whether your figures are correct or that you have claimed your full entitlement to expenses, reliefs and allowances.

“Allowances are a very broad area,” he says. “A few of the common or generous deductions and allowances are for research and development; use of home as an office, within certain limits; buildings bought for business use; and travel and accommodation when working away from home.

“Don’t forget capital allowances such as expenditure on business equipment. Thanks to the annual investment allowance, many capital allowances for SMEs such as plant and machinery offer up to 100% tax relief.”

As an alternative to claiming individual expenses, you may be able to claim simplified expenses, which are flat rates that you can use to calculate tax relief on vehicles, working from home and living on your business premises.

This saves time but may mean you don’t claim for all you might be able to.

Another option is to use the trading allowance instead of expenses to reduce your tax bill. The government allows sole traders to claim up to £1,000 as a tax-free trading allowance, but if you use it, then you’re not allowed to claim expenses or capital allowances.

Charity donations on tax returns

Donations by individuals to charity or community amateur sports clubs (CASCs) attract tax relief, so make sure you include all charitable donations in your return.

The tax relief goes to you or the charity depending on whether you donate through Gift Aid; straight from your wages or pension through a Payroll Giving scheme; give land, property, or shares; or donate in your will.

There are different rules for limited companies as they pay less corporation tax when they give to charity.

To qualify for tax relief, you must keep a record of your donations.

Read more on Self Assessment:

Penalties for filing late and appeals

You’ll usually have to pay the penalty if you file after the deadline or pay late. However, you can appeal against a penalty if you have a reasonable excuse.

Expect a fine of £100 if your tax return is up to three months late or if you pay your tax bill late. You will have to pay more if it is later, and HMRC will charge interest on late payments.

Beyond three months, there is a more complex system of fines based on daily penalties, late filing surcharges, and potential additional penalties for deliberate errors. HMRC also provides a penalty estimation tool.

Charlie Walker says if you are doing your tax return and are concerned your online access to the HMRC website won’t be active in time to file before 31 January, all may not be lost—an accountant or tax adviser could be able to file your return for you via their special agent logins with HMRC.

Bear in mind you will need to grant them explicit permission to do so, which can add time.

Nick Levine adds: “Filing late also increases the chances of HMRC taking a closer look at your return. So, complete the form as early as possible to avoid stress and a missed deadline. If you expect to miss a tax payment deadline, contact [HMRC] immediately.

“You may be able to get more time to pay or to make ad hoc or monthly payments. Keep in mind that, as 31 January approaches, the online service gets busier as do tax advisers.”

How to pay your tax

When filing online, once you have completed your Self Assessment return, HMRC will tell you how much tax you owe.

Payments on account are usually 50% of your previous year’s tax bill (after accounting for tax already deducted at source). You’ll normally make two instalments: one by 31 January and one by 31 July. Any remaining balance for the tax year must be paid by 31 January following the end of that tax year.

If you’re paying your tax bill by debit card, allow two working days for the transaction to clear.

If you prefer to pay more regularly throughout the year—such as weekly or monthly—you can use HMRC’s budget payment plan, but only if your previous payments are up to date and if you are paying in advance.

Ways to pay

The ways to pay your tax are via online or telephone banking (faster payments), CHAPS, debit, or corporate credit card online, your bank or building society, BACS, direct debit (if you have set one up with HMRC before), or by cheque through the post.

You can no longer pay at the Post Office.

Pay your Self Assessment tax bill has more details on each option.

If the deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before the deadline, unless you are paying by faster payments or by debit or credit card.

Charlie Walker says: “Make sure you put something aside for your tax bill each month—particularly if it’s your first year of being self-employed.

“As a rule of thumb, we recommend setting aside a quarter of your profits for tax. If you’re a higher rate taxpayer, increase that to a third.”

You might choose to create a separate saving account for the money. And, yes, you get to keep any interest.

Why business owners may use an accountant and how much they cost

The main reason for doing your tax return yourself is to save money on accountancy bills.

However, many business owners are too busy to do it themselves or lack a detailed understanding of the different allowances they can claim and find that using an accountant pays for itself quickly.

Glenn Collins, head of strategic engagement and technical, at the Association of Chartered Certified Accountants (ACCA), says: “People can come unstuck if they cut corners to save money. Consulting an accountant should save money in tax savings, and in avoiding mistakes and penalties. 

“Tax rules change regularly, so using an accountant is a good way to ensure you are up to date. Plus, professionally qualified accountants have codes of conduct and ethics, continuing professional development requirements, and you will also have recourse if something goes wrong.”

Glenn recommends shopping around to ensure you are paying the correct amount for an accountant. A typical fee would be between £100 and £200 an hour for a small to medium-sized practice.

Charges can also depend on where the business is situated and the complexity of the work. A smaller accountant might charge around £250 to £300 all-in for a straightforward tax return.

Sole traders and other self-employed people might be able to claim the costs for their accountant as an expense, and, appropriately, the accountant themselves will know if this is allowable.

Although strictly not allowed, by concession, it’s considered OK only if the accountant “wholly and exclusively” calculates tax owed for the self-employed income.

If the Self Assessment includes calculations for any other income (such as capital gains), the accountant might decide that it’s not an allowable expense or that only part of their fees can be claimed.

Nick Levine says an accountant can help clients understand income tax rules and be fully aware of the rules and timings. He says using an accountant to file a Self Assessment tax return can ensure all allowable expenses are correctly claimed.

As well as helping avoid errors, they can also help handle any disputes with HMRC,” says Nick.

“Your accountant should always keep in touch, not just at the year-end,” he adds. “This will be even easier if you use cloud accounting software, which will allow your accountant to keep track of how the business is performing in real time.”

The ICAEW and ACCA websites allow you to search for members in your area.

How an accountant helps strategist Kerry Needs focus on her core strengths

Kerry Needs, a writer and marketing strategist at kerryneeds.com, set up her business as a sole trader in 2015 and works remotely with clients worldwide.

She did her tax return in the first year but then started using an accountant from the second year.

“I could do it myself, but I like to focus on my craft rather than things that I’m not strong at,” says Kerry. “And as my business gets more complex, it’s a lot easier to outsource and one less administrative task to do.

“My accountant is knowledgeable. I send my books to him, and he completes my Self Assessment and submits the returns for me. He keeps on top of things, chases up information and provides me copies of everything.

“The cost is reasonable at £250, and it pays for itself in saved time. Using an accountant also minimises the risk of making a mistake.”

Doing her Self Assessment in the first year also means she has a good understanding of the process. To anyone doing it themselves, she recommends doing HMRC’s free training and webinars on Self Assessment.

“It’s important to get to know HMRC and what they require in as much detail as possible, including allowable expenses and things like how to record mileage,” she says.

“Make sure that you document everything, file your receipts carefully, and pay for as much as you can on your business card. You must keep copies of receipts as HMRC can ask for them.”

Final thoughts on filing a tax return online

By now, you should be feeling a little more confident when it comes to filling in and sending your tax return online.

If you decide to do it yourself but are still not sure of anything, you can always contact HMRC and ask them to ensure that you have the correct answer.

This is worth doing because you could be subject to fines and penalties if you complete your tax return incorrectly.

While many small businesses switch to using an accountant at some point, it could well be worth doing your Self Assessment for the first year at least—as you will save some money and have a better understanding of how the tax system works in future.

The key to filing on time is planning. Squeezing in some Self Assessment preparation now will lead to a less stressful experience.

Frequently asked questions about Self Assessment tax returns

What is Self Assessment?

Self Assessment is how the UK government asks for details of sole trader or partnership income so it can calculate the appropriate tax due. You usually either fill out a paper form or complete one online via the HMRC website.

It also covers income from sources such as investments, savings, rental, and capital gains, and not just sole trader/partnership income.

When should I complete a Self Assessment tax return?

If you have any earnings from jobs that aren’t taxed at source i.e. PAYE on your main job, things such as freelancing work, being a landlord (even on a room in your house or holiday let), or a sole trader business or side hustle, that exceeds £1,000 annually, you’ll need to declare them to HMRC. Note that dividend and savings allowances are separate from this.

This also includes any interest you earn on taxable assets e.g. any dividends you receive from investments or interest from savings accounts.

Depending on the amount, this could also affect your tax bracket on PAYE earnings, and any benefits you may claim. So you need to make sure you provide an accurate record of your total taxable earnings to HMRC.

For example, let’s say you work part time in a PAYE job and earn £10,000 a year, but rent out a room in your house for £5,000 a year. You’ll need to declare your rental income on a Self Assessment form as this takes you over your personal tax-free allowance of £12,570.

Another example would be if you earn £35,000 a year in your PAYE job, but have money in savings that accrue interest, each month or year, and shares in a company that pay dividends into your bank account each quarter beyond the tax-free threshold, currently at £2,000. You’ll need to complete a Self Assessment tax return on this extra income.

When are the key dates for Self Assessment tax returns?

Until 2027, the main dates to remember are: 

5 April 2026 is the end of the 2025/26 tax year, 6 April 2026 is the start of the new 2026/27 tax year. 

31 January 2026 is the deadline to declare the previous tax year’s earnings. It’s also the deadline for the first payment on account if you earn above a certain threshold. 

31 July 2026 is when you may have to pay the second instalment of the payment on account. 

31 October 2026 is the deadline for posting a paper-based SA100 tax return for the 2025/26 tax year.

Editor’s note: This article was originally published in December 2018 and has been updated for relevance.

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