You must inform the HMRC if you’ve stopped trading as a sole trader through your Government Gateway Account. You’ll also need to send a final tax return.

If you decide to stop being self-employed because you’ll earn £1,000 or less, tell HMRC you stopped on the 5 April. 

When you send the return, you’ll need to:

  • Work out your trading income

  • Add up your allowable expenses — this may include some of the costs involved with closing down your business, for example phone, internet and postage costs of letting people know

  • Calculate your capital allowances, including any balancing charges if you’ve sold business equipment or machinery

  • Work out if you owe Capital Gains Tax on any assets you’ve sold or ‘disposed’ of

  • Calculate your final profit or loss

You may be able to reduce your final tax bill by claiming:

  • Entrepreneurs’ Relief — this can reduce the amount of Capital Gains Tax you have to pay

  • Overlap relief — this can prevent you from being taxed twice on your profits when you stop trading during a tax year

  • Terminal loss relief — this can offset a loss made in your last tax year against your profit in the 3 previous tax years

You must also cancel your VAT registration if you are registered for VAT.