Last updated: 14 October 2026
Do you have to include revenue from a new consulting business on your tax return?
Yes. If you start consulting as a sole trader, you must include all your income from it on your Self Assessment return, along with your other income such as a salary. You pay income tax on your profit and Class 4 NIC if your profits are above £12,570. If your gross consulting income is £1,000 or less in a tax year, the trading allowance covers it and you don’t need to report it. You must register for Self Assessment by 5 October after the end of the tax year you started.
What to report
| Item | Reported? |
| Fees invoiced or received (depending on accounting basis) | Yes |
| Allowable expenses | Yes, deducted to get profit |
| Income under £1,000 a year, no other reason to file | No |
| Consulting through your own limited company | No, the company reports it; you report salary and dividends |
Cash basis or accruals?
Since 2024/25, the cash basis is the default for sole traders. You’re taxed on money actually received in the tax year, not on invoices raised. You can opt for the accruals basis instead, which matches income to when work is done. Larger consultancies often prefer accruals.
Example
Simon leaves his job in June 2026 and starts consulting. By 5 April 2027, he’s received £38,000 in fees and has £4,000 of expenses for software, travel and a laptop. His salary from April to June was £12,000. On his 2026/27 return, he reports the salary and £34,000 of trading profit. He registers for Self Assessment by 5 October 2027 and files by 31 January 2028.
Expenses consultants can claim
- Professional insurance and subscriptions
- Software, phone and broadband (business share)
- Travel to client sites (not a permanent workplace)
- Accountancy fees
- Equipment such as laptops
- Training to update existing skills
Payments on account
If your tax bill is over £1,000 and less than 80% of your tax is deducted at source, you’ll make payments on account towards the next year: half on 31 January and half on 31 July. In your first year this can mean paying 150% of your tax bill in January.
VAT and Making Tax Digital
- Register for VAT if your turnover goes over £90,000 in any 12 months
- From April 2026, MTD for Income Tax applies if your qualifying income is over £50,000, falling to £30,000 from April 2027
IR35
If you work through your own company for a client in a way that looks like employment, IR35 or the off-payroll rules may apply. As a sole trader, check your employment status on each contract.
Common mistakes
- Not registering for Self Assessment on time
- Forgetting income received in the final weeks of the tax year
- Not saving for the first-year bill including payments on account
- Claiming the trading allowance and expenses together
Frequently asked questions
Do I need a business bank account?
Not legally, but it makes records easier.
Can I claim expenses before I started?
Yes, pre-trading costs within 7 years if they’d be allowable.
Do I pay Class 2 NIC?
No, it was abolished for profits above the threshold.
Should I set up a company instead?
It depends on profits; take advice.
Related: freelance income while employed, working out taxable profits and whether to incorporate.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with new business tax returns. See our sole trader accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
