Whether or not you need to file depends on the specific regulations of the country where you’re operating, but I can provide a general guideline for the UK, which is a common jurisdiction for sole traders. As a sole trader in the UK, you are typically required to submit a Self Assessment tax return to HM Revenue and Customs (HMRC), even if your business has not started trading yet. Since you registered in July 2024 and have not yet commenced trading, here is what you should consider:
Notification Requirement: You must inform HMRC that you’ve set up as self-employed by 5th October in the second tax year of starting your business. For you, that would be 5th October 2025. This consideration ensures you complete the initial step on time, even without trading activity.
Filing Requirement: Even if you haven’t traded, and consequently have zero income, you are still generally required to file a tax return by the deadline, which is 31st January after the end of the tax year. Since you registered in July 2024, your first relevant tax year ends on 5th April 2025, and the return must usually be filed by 31st January 2026.
Trading and Income Declaration: If you have no business income and negligible expenses, your tax return might just state that your earnings and expenses were zero. This return ‘zero trading income’ fulfillment acts as a formality in complying with legal obligations.
Tax Implications: As there is no profit, there would be no income tax to pay, but you should also consider National Insurance Contributions. If your income is below the threshold for paying Class 2 National Insurance, you might not owe any contributions, but it’s worth double-checking or getting advice to make sure there aren’t any missed opportunities or obligations.
Future Considerations: In the next tax return, if you begin trading, you must update HMRC with this status change and report your income accurately. Tracking these developments is crucial to provide accurate, honest documentation in the future.
In conclusion, you should inform HMRC about your self-employed status by the specified deadline and file your tax return by 31st January 2026, even if it’s a zero return. Consider seeking advice from an accountant or professional familiar with your jurisdiction to ensure you’re within compliance and understand all potential implications.
One Comment
Thank you for this insightful post! It’s crucial for new sole traders to understand their obligations, even before they start trading. I want to emphasize the importance of keeping detailed records during this initial period. Even if you haven’t generated income yet, maintaining a thorough record of any expenses incurred in preparation for your business—like equipment purchases or marketing—can be beneficial.
Additionally, while filing a zero return is often straightforward, it can still serve as a valuable opportunity to familiarize yourself with the Self Assessment process and possibly identify areas for future business growth.
Finally, I’d encourage anyone in a similar situation to consider joining a local business network or online community for sole traders. These platforms can offer support, resources, and the chance to learn from others’ experiences, which can be invaluable as you embark on your entrepreneurial journey. Being proactive now can pave the way for smoother operations once you start trading!