Closing a Sole Trader Business
If the time has come to stop trading as a sole trader, you need to follow a few simple steps to correctly wrap up your tax affairs with HMRC.When you cease self-employment, you must inform HMRC so they know not to expect any more tax returns from you.
Step 1: File Your Final Tax Return
You must file a final Self Assessment tax return for the tax year in which you stopped trading. On this return, you will need to enter the date you ceased self-employment.
Step 2: Pay Your Final Tax Bill
Your final tax bill will include any tax and National Insurance due on your profits up to your final day of trading. You may also need to account for any 'balancing charges' if you have claimed capital allowances on equipment.
Step 3: Keep Your Records
Even though you have stopped trading, you must keep your business records (invoices, bank statements, receipts) for at least 5 years after the 31st January filing deadline of your final return.
Step 4: De-register from Self Assessment
After filing your final return, you should contact HMRC to de-register from Self Assessment to avoid receiving any future requests to file or potential penalties.