Death of a Sole Trader: HMRC Notifications and Closing the Business

Notifying HMRC

The first step is to notify HMRC of the death. This can be done via the Tell Us Once service, which notifies multiple government departments simultaneously. Alternatively, contact HMRC's Bereavement team directly by telephone or writing.

For a sole trader, separate notifications may be needed for:

• Self Assessment (the deceased's individual tax return)
• VAT (if VAT-registered)
• PAYE (if the deceased employed anyone)
• National Insurance

The executor will be authorised to deal with HMRC once they have the grant of probate (for estates above the threshold) or by completing HMRC Form 64-8 as agent.

The final Self Assessment return

A final Self Assessment tax return must be filed covering the period from the start of the last tax year (6 April) to the date of death. This must be filed by the executor, using the usual Self Assessment process but noting the date of death on the return.

The deadline for filing is the normal Self Assessment deadline: 31 January following the end of the tax year of death (for online filing) or 31 October for paper filing. Interest and penalties apply for late filing.

If the deceased had not already filed previous years' returns, the executor must file those too — HMRC can go back up to 4 years for standard assessments, or 6 years for underpaid tax.

Business income, expenses, and profit for the final trading period are reported on the SA100 (Self Assessment) return with the SA103 (self-employment supplement). Any capital allowance claims are finalised in the final return.

VAT deregistration

If the deceased was VAT-registered, the executor must cancel the VAT registration within 30 days of the date the business ceased trading (which is typically the date of death, or shortly after if the executor winds down trading gradually).

To cancel, submit a VAT 7 form to HMRC. A final VAT return must be submitted covering the period to the cancellation date. Any VAT repayment due will be paid to the estate; any VAT owed must be paid.

If the executor continues trading the business briefly (e.g., to fulfil outstanding orders), VAT obligations continue during that period. Consider whether continued trading is necessary and advisable.

PAYE obligations

If the deceased employed staff, the executor must:

1. Notify HMRC that the employer has ceased — submit a final Full Payment Submission (FPS) through PAYE online payroll software
2. Issue P45s to all employees — employees need these to give to a new employer or to claim tax credits
3. Pay outstanding PAYE and National Insurance — these are debts of the estate
4. Notify employees of the situation and their rights under employment law (redundancy entitlements, notice periods)

If the business employed staff, specialist employment law advice may be needed regarding redundancy payments and consultation obligations.

Business assets in the estate

Business assets (stock, equipment, premises, debtors) form part of the deceased's estate. The executor must value them for probate and IHT purposes.

Business Property Relief (BPR) may reduce the IHT charge on qualifying business assets by 50% or 100%. For a sole trading business that was carried on by the deceased, the qualifying conditions are:

• The deceased owned the business for at least 2 years before death
• The business was a qualifying business (not wholly or mainly investment)

If BPR applies, the relevant assets are excluded from IHT in full (100% relief). For the BPR context, see our inheritance tax UK 2026–27 guide.

Outstanding business debts

Any outstanding business debts — trade creditors, business loans, outstanding tax — are debts of the estate. They must be paid before beneficiaries receive their inheritance. See our debts after death guide for the order of priority.

Conversely, amounts owed to the business (trade debtors) are assets of the estate and should be collected by the executor.

Practical steps for the executor

1. Notify HMRC of the death as soon as possible
2. Locate all business records (tax returns, VAT records, PAYE records)
3. Engage an accountant to prepare the final tax return
4. Deregister from VAT within 30 days if applicable
5. Issue P45s and final payroll submissions if there were employees
6. Value business assets for probate
7. Assess whether BPR is available on business assets
8. Collect outstanding trade debts
9. Pay outstanding business liabilities

For the general estate administration process, see our estate administration checklist, complete UK probate guide 2026, and applying for probate guide. For the very first steps, see what to do when someone dies. For company director deaths, see our death of a company director guide. For the SA900 estate tax return, see our completing the SA900 guide. For partnership member deaths, see our death of a partnership member guide. For executor first steps, see our executor first steps guide. Farra can help — get started here.