Are you planning to stop being self-employed?
Whether you are closing the business for good, taking a break, or moving into a new role, there are steps you need to take to make the transition as smooth as possible.
As a sole trader, you do not have to “close” a company, as you and your business are a single entity (not a limited company), but you do need to stop trading cleanly.
That means finishing client work, collecting money owed, dealing with suppliers, and making sure HMRC knows your self-employment has ended.
1. Finish up your work
Before you stop trading, complete any work you have already agreed to do.
Complete outstanding jobs where possible, send final invoices, and make sure clients know when your business will close. If you cannot finish a piece of work, be clear about this early and agree how it will be handed over or cancelled.
It is also worth checking your terms of business, contracts, retainers, subscriptions, software tools, insurance policies and any supplier commitments. Closing a sole trader business is usually simple, but loose ends can still create problems later.
2. Inform HMRC you’ve ceased being self-employed
Let HMRC know that you have stopped trading as a sole trader.
You can do this through your Government Gateway account or by contacting HMRC directly. If you do not tell HMRC, they may still expect you to file a Self Assessment tax return, even if you have no income.
When you notify HMRC, you will usually need to provide the date your self-employment ended.
You will still need to file a final Self Assessment tax return, covering the tax year in which you stopped trading.
3. Pay any outstanding tax
HMRC will expect a final tax return after the end of the tax year in which your self-employment ended.
This return should include your trading income and expenses up to the date you stopped. You may also need to include other income, such as employment income, interest on savings, property income, or dividends.
You may still have Income Tax and National Insurance to pay. Depending on your profits and the tax year involved, this could include Class 2 and Class 4 National Insurance.
If you made payments on account and your final profits were lower than expected, you may be due a refund or be able to reduce your next payment on account. Check your online tax account before assuming nothing further is due.
90% off Xero Accounting Software for 6 months
Fully compatible with Making Tax Digital (MTD) for sole traders from April 2026.
4. Cancel your VAT registration (if applicable)
If you are VAT registered and have ceased trading, you should cancel your VAT registration.
This can usually be done online. After cancellation, you will normally need to submit a final VAT return and pay any VAT due.
You may also need to account for VAT on stock, assets or equipment still held by the business when registration ends, depending on the value involved.
Find out more here: How to cancel your VAT registration.
5. Deal with PAYE if you have employees
If you employed staff and operated a PAYE scheme, you need to close it down correctly.
This usually involves sending a final Full Payment Submission (FPS), making any final payroll payments, issuing P45s, and telling HMRC the scheme has ended.
You should also deal with holiday pay, final payslips, pension contributions and any workplace pension duties.
See the official guidance here: closing a PAYE scheme.
6. Let your clients and suppliers know
Tell clients, suppliers and anyone else you deal with that you are wrapping things up.
Confirm final work dates, outstanding invoices, refunds, deposits, subscriptions and any ongoing support arrangements. If you have regular customers, give them enough notice where possible.
Once all payments have cleared and no further business transactions are expected, you can close your business bank account if you no longer need it.
7. Keep your business records
Stopping self-employment does not mean you can throw away your paperwork.
You must keep your business records for at least five years from the 31 January submission deadline following the end of the relevant tax year. This includes sales records, expenses, receipts, mileage records, bank statements and any other evidence used to complete your tax return.
See HMRC’s record-keeping guidance.
8. De-register from CIS (if relevant)
If you were registered under the Construction Industry Scheme, let HMRC know if you are no longer working as a subcontractor in the construction industry.
You can read the official guidance here: what you must do as a CIS subcontractor.
9. Review your pension or savings
If you were paying into a personal pension while self-employed, you can usually continue contributing after you stop trading.
The amount of tax relief available may depend on your earnings and circumstances, so check the position before making large contributions.
This is also a useful time to review your savings, emergency fund and retirement plans, especially if your income is changing. Take a look at our self-employed pensions section.
10. Planning to go self-employed again?
You can usually re-register as self-employed with HMRC if you start trading again later.
Your Unique Taxpayer Reference (UTR) normally stays with you, so you should not need a new one. You will still need to tell HMRC when your new self-employment begins and keep proper records from day one.
Closing down doesn’t need to be stressful
Ceasing self-employment is usually straightforward, but you do need to follow the steps we’ve outlined here to make a clean exit from your business.
Make sure you complete any work you have agreed to do and file a final tax return, along with a payment for any taxes you owe. And make sure you keep your business records in a safe place.
If your affairs are simple, you may be able to handle the process yourself. If you are VAT registered, have employees, work under CIS, or are unsure about your final tax position, speak to an accountant before submitting your final return.
