How to Stop Being Self-Employed: A Step-by-Step UK Guide

To stop being self employed, you need to tell HMRC that you've ceased trading, submit any outstanding Self Assessment tax returns, pay any tax you owe, and keep your business records for the required period. 

Whether you've taken a permanent job, wound down your business, or just decided freelancing isn't for you anymore, leaving self employment requires some admin. 

Miss it, and you could find yourself chased for tax returns you thought didn't apply to you anymore, or hit with penalties on a business that no longer exists. 

Key points

• You need to file a final Self Assessment tax return 📝
  Your final return should include all self employment income and allowable expenses up to the date you stopped trading, along with any other taxable income you received during the tax year.
• You may need to pay tax, or you could be due a refund 💷
  Once your final return is submitted, HMRC will calculate whether you owe any additional Income Tax and National Insurance or whether you've overpaid through payments on account and are entitled to a refund.
• VAT, PAYE, and business records need to be dealt with separately 📂
  Closing your sole trader business doesn't automatically cancel your VAT registration or PAYE scheme. You'll also need to keep your business records for the required period after you stop trading.
• Good bookkeeping makes closing your business much easier 🚀
  Keeping accurate records throughout your time as a sole trader makes it simpler to file your final return, track what you owe, and meet HMRC's requirements. ANNA helps by combining everything in one place.

Why you can't just stop and walk away

When you're self employed, HMRC expects a Self Assessment return every year. If you stop trading without formally notifying HMRC, the returns are still expected. Miss the deadline for one, and the £100 late filing penalty kicks in automatically, even if you don't owe a penny of tax.

Formally deregistering tells HMRC that future returns are no longer required. Until that update is processed, you’re still obligated to file.

How to stop being self employed: The step-by-step guide

To stop being self employed, you'll need to tell HMRC that you've ceased trading, submit a final Self Assessment tax return, and settle any remaining tax obligations. 

Follow the steps below to make sure nothing gets missed:

Step 1: Tell HMRC you've stopped being self employed

The fastest route to HMRC is online. Log into your Government Gateway account, go to the Self Assessment section, and select the option to report that you've stopped self employment. 

If you'd rather speak to someone, you can call the Self Assessment helpline on 0300 200 3310 (Monday to Friday, 8 am to 6 pm). You can also write to HMRC, though postal requests typically take two to six weeks to process.

Have the following information before you contact HMRC:

• Your Government Gateway user ID and password
• Your Unique Taxpayer Reference (UTR), the 10-digit number on any previous HMRC correspondence
• Your National Insurance number
• The exact date your self employment ended

Once HMRC processes your notification, they'll stop expecting future Self Assessment returns. They may also write to confirm whether a final return is needed.

🧠 Good to know

Your cessation date is the last day you traded or invoiced as a self employed person, not the date you told HMRC or closed any accounts.

Step 2: File your final Self Assessment tax return

Notifying HMRC that you've stopped trading doesn't close your outstanding Self Assessment obligations. You'll need to file a final return covering the period from the start of the tax year to your cessation date.

Your final return should include:

• All self employment income up to the date you stopped trading
• Allowable business expenses up to the same date
• Any employment income earned in the same tax year if you moved to PAYE partway through
• Capital allowances or balancing charges on any business assets you disposed of
• Any income from savings, dividends, or property that would normally appear on a Self Assessment return

The normal deadlines apply to your final return. 

Here are the deadlines for the 2026/27 tax year (ending 5 April 2027):

If you stopped trading mid-year, make sure the cessation date is included on your return. HMRC can charge a £60 penalty if it's missing.

Step 3: Pay any tax and National Insurance you owe

Your final tax calculation will cover Income Tax on your profits and Class 4 NICs (if your profits exceed £12,570). Pay any balance by 31 January 2028 to avoid interest charges.

If you've been making payments on account, and your income has now dropped to zero, you may be able to apply to reduce or cancel your next payment. You can do this through your HMRC online account or by submitting form SA303. 

You could also be entitled to a tax refund if your payments on account were based on higher profits from a previous year. Once you submit your final Self Assessment tax return, HMRC will compare the tax you've already paid with the amount you owe and refund any overpayment. 

💡 Did you know? 

ANNA’s Auto Accountant automatically calculates your tax bill in real time, so you know what you owe when you're ready to file your final return. 

Step 4: Cancel your VAT registration (if applicable)

If your turnover was above the VAT threshold and you registered for VAT, deregistering from Self Assessment doesn't automatically cancel your VAT registration. 

You have to notify HMRC within 30 days of stopping trading. The quickest way is to cancel your VAT registration online through your Government Gateway account. 

You'll also need to submit a final VAT return covering the period up to your deregistration date. This return may need to account for any stock or assets you still hold, as VAT can sometimes be due on these even if you're not selling them.

HMRC typically takes around three weeks to confirm your VAT cancellation and issue an official deregistration date. From that deregistration date, you have to stop charging VAT to customers.

Step 5: Close your PAYE scheme if you had employees

If you’ve employed anyone, you'll need to formally close your PAYE scheme by submitting a final Full Payment Submission (FPS) or an Employer Payment Summary (EPS) through your payroll software, with the 'final submission' indicator ticked.

You should also issue P45s to any employees on their last day of employment.

If you were in the Construction Industry Scheme (CIS) as a contractor or subcontractor, contact the CIS helpline on 0300 200 3210 to report that you're no longer operating.

Step 6: Sort your business bank account and records

Once your tax affairs are settled and HMRC confirms deregistration, you can close any business bank accounts you no longer need. Before you do, make sure HMRC has your personal bank details on file if you're expecting a tax refund, because any payment sent to a closed account will cause delays.

On the records side, you're legally required to keep business records for at least five years after the 31 January deadline for the relevant tax year. For the 2026/27 tax year, that means keeping everything until at least 31 January 2033. This covers invoices, receipts, bank statements and any other supporting documents HMRC might request.

🧠 Good to know

If you registered for Self Assessment because of a reason other than self employment (rental income, for example), stopping the self employment itself may not be enough to close your Self Assessment account. You'll need to check whether any other untaxed income still applies.

What if you're switching from self employment to a limited company?

If you're switching to a limited company to continue operating your business, you'll still need to complete all the steps above to close your sole trader business. You'll also need to register your new limited company for Corporation Tax, PAYE, and VAT where applicable. 

Besides that, you’re required to complete a 'Starter Checklist' for any employment income you take from the company under PAYE, since there's no P45 when you leave self employment. Your new employer (even if that employer is your own company) will then submit the checklist to HMRC to set the right tax code.

Make your final Self Assessment stress-free with ANNA

Wrapping up your sole trader business is much less stressful when your records are organised, your final Self Assessment is ready, and your tax position is clear.

ANNA keeps your finances organised at every stage of running your sole trader business, making it easier to stay on top of bookkeeping, tax obligations, and business admin right up to your final return.

Here’s what ANNA offers:

• Business account: Keep your business income and expenses separate from your personal finances
• Automatic bookkeeping: Categorise transactions automatically and keep your records organised throughout the tax year
• Receipt capture: Store receipts digitally in one place so supporting documents are always easy to find
• Real-time tax estimates: Track your estimated tax bill as you earn and avoid unexpected liabilities
• Smart money pots: Set aside money for tax automatically and stay prepared for upcoming payments
• Free Self Assessment filing: Calculate and submit your tax return directly to HMRC, including your final return after you stop trading
• Invoice creation: Create professional invoices, track payments, and keep a complete record of your business income
• VAT support: Calculate, track, and submit VAT returns if your business is VAT registered
• Payroll services: Manage employee payroll and RTI submissions from a single account

Sign up with ANNA today and stay on top of your finances, whether you're growing your business or winding it down.