Stop being self-employed

Business: Selling Closing

    You must tell HM Revenue & Customs (HMRC) if you’’ve stopped trading as a sole trader or you’’re ending or leaving a business partnership. You’’ll need to send final tax returns and tell employees that you’’re closing your business.

    How to tell HMRC

    Tell HMRC you’’re no longer going to be self-employed using the online form. They’ll cancel your Class 2 National Insurance contributions.

    Tax returns

    You must send a Self Assessment tax return by the deadline if you’’re stopping trading as a sole trader or you’re leaving a business partnership.

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

    • work out your trading income
    • add up your allowable expenses
    • 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
    • calculate your final profit or loss

    If your business partnership is ending, the nominated partner should also send a final Partnership Tax Return by the deadline.

    Tax relief

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

    • Entrepreneurs’ Relief – you may be able to reduce the amount of Capital Gains Tax you have to pay by claiming Entrepreneurs’ Relief
    • overlap relief – this can prevent you being taxed twice on your profits when you stop trading during a tax year
    • terminal loss relief – if you’’ve made a loss in your last tax year, you may be able to offset it against your profit in the 3 most recent tax years

    There are other reliefs to reduce the amount of Capital Gains Tax that you may be able to claim – HMRC has more information.

    You can get more information about overlap relief and terminal loss relief in HMRC’’s factsheet ‘Taxable profits’.

    VAT registration

    You must cancel your VAT registration if you or your partnership are registered.

    If you’re insolvent

    You’ll usually be personally liable for your business debts. Your creditors can take you to court or make you bankrupt if you don’t pay.

    You might be able to find an alternative, eg an Individual Voluntary Agreement.

    If you employ people

    You must:

    • follow the rules on redundancy
    • pay any outstanding PAYE tax and National Insurance to HMRC and get them to close your business’ payroll scheme
    • call HMRC’’s Employer Helpline and tell them you won’’t be employing staff

    HMRC Employer Helpline
    Telephone: 0300 200 3200
    Monday to Friday, 8am to 8pm
    Saturday, 8am to 4pm
    Find out about call charges

    Tell HMRC if you’ve stopped being self-employed, or you’re ending or leaving a business partnership – responsibilities, tax returns, letting any employees know