How to stop being self-employed in the UK.

Who this guide is for

This guide covers sole traders who stop trading, and partners who leave or close a partnership. Whether you take a job, retire or move to a limited company, the steps with HMRC are much the same.

If you run a limited company, this is not the right process. A company is closed through Companies House and has its own rules. For the difference between the two structures, see our guide to sole trader vs limited company tax.

Step 1: pick and record your last trading day

Start by deciding the date the business stopped. This is the date you stopped selling goods or services, not the day the last customer paid you. Everything else hangs off it: the tax year your final return covers, your VAT cancellation date and the period of your last accounts.

Keep evidence of it, such as a final invoice or an email telling customers you have closed.

Step 2: tell HMRC you have stopped

You must tell HMRC when you stop trading as a sole trader, or when you end or leave a partnership. HMRC has an online service for this. You sign in to your HMRC account and give the date you stopped. You can use the same service to say you no longer need to send Self Assessment returns.

If an agent such as an accountant looks after your tax, they can tell HMRC for you. They can use HMRC's online form, or phone or write to HMRC.

If your income has simply dropped very low

Some people are not stopping completely. They just expect to earn very little. You do not need to be registered as self-employed if you earn £1,000 or less as a sole trader in a tax year. In that case, HMRC says to tell them after the end of the last tax year you were self-employed. Its own example is someone who stops on 3 March 2026 and tells HMRC after 5 April 2026.

You can choose to stay registered. This can help if you need to prove you are self-employed, for example to claim Tax-Free Childcare, or if you want to pay voluntary Class 2 National Insurance.

Step 3: send your final Self Assessment return

Stopping does not end your tax return duties straight away. You still send a return for the tax year in which you stopped, by the normal deadline. For the 2025/26 tax year, the deadlines are:

• Paper return. 31 October 2026.
• Online return. 31 January 2027.
• Paying the tax you owe. 31 January 2027.

If you stop during the 2026/27 tax year, your final return covers 2026/27. The same pattern applies, with the online return and payment due by 31 January after the tax year ends.

For the final return you will need to work out:

• Your trading income up to the day you stopped
• Your allowable expenses. These can include closing-down costs, such as the phone calls, internet and postage used to tell people you have stopped
• Capital allowances, including any balancing charge on equipment or machinery you sell
• Any Capital Gains Tax due on business assets you sold or disposed of
• Your final profit or loss

If you were in a partnership, the nominated partner also sends a final Partnership Tax Return (SA800) by the deadline.

A worked example

Step 4: check the reliefs that can apply

Closing a business can bring reliefs that you would not normally use. The main ones HMRC lists are:

• Business Asset Disposal Relief. This can reduce the Capital Gains Tax on business assets you dispose of.
• Overlap relief. This can stop you being taxed twice on the same profits when you stop trading part way through a tax year.
• Terminal loss relief. If you make a loss in your last tax year, this can let you set it against your profits from the 3 previous tax years.

Other Capital Gains Tax reliefs may also apply. HMRC's helpsheet HS222 explains overlap and terminal loss relief in detail.

Payments on account

Many sole traders pay their tax in advance through payments on account, due by 31 January and 31 July. These are based on last year's bill. If you expect your bill to be lower because the business has stopped, you can ask HMRC to reduce them, online or by post using form SA303. If you reduce them too far and the final bill is higher, HMRC charges interest on the difference.

Step 5: National Insurance after you stop

As a self-employed person you pay Class 4 National Insurance through your tax return. For 2026/27, it is charged at 6% on profits between £12,570 and £50,270, and 2% above that. This is worked out on your final return along with your Income Tax.

Class 2 is no longer something you have to pay. If your profits are £7,105 or more for 2026/27, Class 2 is treated as paid, which protects your National Insurance record. Below that, you can choose to pay voluntary Class 2 at £3.65 a week. Your State Pension depends on your National Insurance record, so check your record if you will have gaps after you stop. See how the self-employed pay National Insurance.

Step 6: close the other registrations

Your Self Assessment record is not the only thing to close. Go through this list:

• VAT. If you are VAT registered, you must cancel your registration within 30 days of stopping, or you may be charged a penalty. You then send a final VAT return for the period up to and including the cancellation date. If the VAT on the stock and assets you still hold is over £1,000, and you reclaimed or could have reclaimed VAT on them, you must account for it on that return. HMRC usually confirms cancellation within 40 working days. Our guide to VAT deregistration covers the details.
• PAYE. If you employed staff and that is ending, close your PAYE scheme and send your final payroll reports to HMRC.
• CIS. If you are registered for the Construction Industry Scheme as a contractor or subcontractor, call the CIS helpline as soon as possible after you stop.
• Making Tax Digital for Income Tax. If you already use it, you report the date your business income ended through your HMRC account. You must do this by the quarterly update deadline for the period in which the income stopped. You then send the final quarterly update for that period and file the year's tax return using your Making Tax Digital software.

Step 7: settle debts and keep your records

As a sole trader, you are usually personally liable for the business's debts. Closing the business does not clear them. Creditors can take you to court or make you bankrupt if they are not paid. If you cannot pay, there may be alternatives such as an Individual Voluntary Arrangement. Get advice early.

Do not throw your records away when you close. Sole traders must keep records for at least 5 years after the 31 January submission deadline for the relevant tax year. If you were VAT registered, separate VAT record rules also apply. Our guide on how long to keep business records sets out the rules.

A closing-down checklist

• Choose and record your last trading day
• Tell HMRC you have stopped, or ask your agent to
• Send final invoices and settle the bills you owe
• Bring the books up to date to the last trading day
• Cancel VAT, close PAYE and contact the CIS helpline if they apply
• Review your payments on account
• File the final Self Assessment return and pay by the deadline
• Keep your records for as long as the rules require

Why the books matter at the end

The final return is only as good as the records behind it. Books often slip while a business winds down. Getting the bank fully reconciled to your last trading day makes the final figures much easier to work out and check.

If you are moving from sole trader to a limited company, the same applies in reverse. The old business needs a clean final set of books, and the new company needs its own from day one. See our guides on setting up a limited company and bookkeeping for sole traders.