Self-employed individuals form a considerable and vital part of Singapore’s economic fabric, representing 12.2% of the workforce in 2023. These workers drive innovation and growth across various sectors – from sole proprietors and freelancers to private-hire drivers and hawkers, these business owners face a unique set of tax obligations that differ significantly from those of salaried employees.
Despite a slight decline in self-employment rates from previous years, the government continues to recognise the economic importance of this sector through targeted support programmes. With self-employment establishing itself as a key part of Singapore’s overall workforce, proper tax compliance remains a critical issue for a substantial portion of Singapore’s economy.
Unfortunately, the costs of making mistakes at tax time can be substantial. Beyond potential penalties and interest charges, filing errors may trigger audits, create cash flow problems, and limit your ability to access government assistance programmes like the Self-Employed Person Income Relief Scheme (SIRS).
With tax authorities increasing their focus on compliance, getting your tax affairs in order has never been more important. This guide walks you through the most common pitfalls in self-employed tax filing and provides practical strategies to avoid them.
By implementing these recommendations, you can minimise tax-related stress, reduce compliance risks, and potentially identify legitimate deductions that might otherwise be missed. Whether you have recently started your business venture or have been self-employed for years, these tips will help you understand tax season with greater confidence and precision.
Related Read: 7 Ways to Legally Reduce Income Tax in Singapore (2025)
Understanding the Self-Employment Status
Knowing if you qualify as a self-employed person stands as your first major step for tax compliance. IRAS categorises you as self-employed when you make your living through a trade, business, profession or vocation. This broad category includes many different working arrangements.
Self-employment includes several groups:
- Sole proprietors: Business owners with ACRA registration under the Business Registration Act 1956
- Freelancers: Workers providing services to multiple clients without formal business registration
- Commission agents: People earning mainly through commissions not fixed pay
- Private-hire car drivers and taxi drivers: Transport providers working on their own
- Hawkers and small vendors: Food sellers and retail traders operating independently
Many people think formal business registration defines self-employment status. IRAS notes that even non-registered businesses run from home generate business income for tax purposes. What matters most is what you do, not your registration status.
Some wrongly assume that having several clients or working from home makes them employees rather than self-employed. IRAS looks at who takes on business risk and who controls how work happens to decide your correct status.
Getting your classification right matters for tax reporting, possible deductions, and your final tax bill. If unsure about your status, IRAS offers tools to help you understand whether you count as self-employed, which stops potential problems before they start.
Setting Up Proper Accounting Practices
Selecting the right accounting period is a basic yet crucial decision for self-employed individuals. Your accounting period represents the 12-month timeframe for which you calculate profits or losses. This choice affects your tax filing schedule and cash flow management.
Choosing Your Accounting Period
When starting your business, you must decide on your accounting period. Most small businesses in Singapore opt for a calendar year ending 31 December, which aligns with the standard tax assessment year. This approach simplifies record-keeping and reduces confusion at tax time.
You may select any date for your accounting period end. Some businesses choose dates that match their business cycles or slower periods when conducting stock taking proves less disruptive. For example, businesses with high activity during Singapore’s May holiday season (Labour Day, Vesak Day, Hari Raya Puasa) might select a July or August year-end to complete their financial closing during a quieter period.
How Accounting Periods Affect Tax Filing
Your chosen accounting period directly impacts when you report income. For a business with a 31 December year-end, profits earned during the calendar year 2024 will be taxed in the Year of Assessment (YA) 2025.
For non-calendar fiscal years, the rule remains straightforward – the basis year refers to the accounting year that ends in the previous calendar year. For instance:
- Accounting period: 1 April 2023 to 31 March 2024
- This period ends in 2024
- Income reported in YA 2025
Related Read: Complete Guide on Personal Income Tax Singapore 2025
Record-Keeping Requirements
Proper records will always be the backbone of tax compliance for self-employed persons. From your first day of operations, IRAS expects complete and accurate records of all business transactions, not estimates or partial documentation.
Legal Obligations for Business Records
Self-employed persons must keep records that fully explain all business dealings. Your records must:
- Show a complete money trail of all business activities
- Back up all income and expense claims in tax filings
- Remain available for at least five years from the relevant Year of Assessment
- Include original documents that confirm each transaction
IRAS rejects estimated figures during tax reviews. Poor records often lead to rejected expense claims, income estimations (typically higher than actual), or penalties for failing to meet standards.
Key Documents to Keep
A good record system includes these basic document types:
Income Records
- Sales invoices and receipts
- Service agreements and contracts
- Payment vouchers and till tapes
- Bank statements showing business money received
- Commission statements and payment records
Expense Records
- Purchase invoices and receipts
- Rental agreements and payment receipts
- Utility bills for business use
- Supplier statements and delivery notes
- Payment vouchers for services bought
Asset Records
- Purchase documents for business equipment
- Loan agreements for business assets
- Depreciation calculations
- Records of sold or discarded business assets
- Repair and improvement receipts
Paper vs Digital Records
Both paper and digital record systems satisfy IRAS requirements if they capture all needed information. Digital systems offer benefits such as:
- Less physical storage space needed
- Quick finding and organising of transaction data
- Auto-backup options
- Links to accounting software
- Protection against physical damage
Common Recording Errors
Many self-employed people make these record-keeping mistakes:
Missing Source Papers: Keeping summary records without supporting original documents. IRAS requires original invoices, receipts, and contracts proving real transactions.
Mixing Personal and Work Spending: Failing to split personal and business transactions creates problems during tax preparation and may cause rejected deductions.
Poor Cash Records: Cash transactions without proper papers create high audit risks. Every cash payment needs proper documentation.
Delayed Updates: Putting off record updates for months leads to forgotten details and lost documents. Update your records weekly at a minimum.
Poor Asset Tracking: Many self-employed people track business assets poorly, missing chances for capital allowances and accurate reporting when assets are sold.
Well-kept records satisfy tax rules and provide business insights. InCorp helps self-employed persons set up customised record systems to prevent these common errors, with templates, digital solutions, and expert advice that reduces tax risks.
Related Read: Guide to File Personal Income Tax in Singapore in 2025
Preparing Accurate Financial Statements
At the end of each accounting period, self-employed persons must prepare a statement of accounts consisting of two main components: a Profit and Loss Account and a Balance Sheet. These documents summarise your financial position and form the basis of your tax calculations.
Profit and Loss Account
This statement shows your business performance over the accounting period by listing:
- Total revenue (sales, fees, commissions)
- Cost of sales (direct costs of providing goods/services)
- Gross profit (revenue minus cost of sales)
- Business expenses (rent, utilities, transport, etc.)
- Net profit/loss (gross profit minus expenses)
Balance Sheet
The balance sheet presents your financial position on the last day of your accounting period, displaying:
- Assets (cash, equipment, stock, money owed to you)
- Liabilities (loans, money you owe to others)
- Owner’s equity (the difference between assets and liabilities)
Common accounting errors include mixing capital and revenue expenses, incorrect stock valuations, and failing to match income with related expenses. We have seen small errors compound into larger tax mistakes, so it often pays to have a trusted accounting partner assist you at filing time. Professional assistance proves particularly valuable if you lack accounting experience or have complex business arrangements.
Understanding 2-Line vs. 4-Line Statements
After preparing your financial statements, you must extract key figures to create either a 2-line or 4-line statement for your tax return. Which format you use depends on your business revenue.
Revenue Thresholds
From YA 2021 onwards, IRAS applies these rules:
- 2-line statement: For businesses with revenue up to $200,000
- 4-line statement: For businesses with revenue above $200,000
This marks a change from YA 2020 and earlier, when the threshold stood at $100,000.
What Each Statement Includes
2-Line Statement
- Revenue (total business income)
- Adjusted profit/loss (after accounting for allowable expenses)
4-Line Statement
- Revenue
- Gross profit/loss (revenue minus cost of sales)
- Allowable business expenses
- Adjusted profit/loss
Related Read: Singapore Budget 2025: What Key Tax Highlights Do You Need to Know?
Tax Filing Scenarios and Requirements
Whether you need to file a tax return as a self-employed person depends on your situation. IRAS uses different notification methods, and your response varies based on which type you receive.
Four Common Notification Scenarios
1. SMS/Letter requiring filing If you receive this notification, you must e-File your tax return via myTax Portal using Singpass between 1 March and 18 April. This applies regardless of how much you earned.
2. Paper Income Tax Return (Form B/B1) You must complete and submit this form by 18 April. While you can mail it to IRAS, e-Filing offers benefits such as pre-filled information and faster processing.
3. No-Filing Service (NFS) notification If selected for NFS, you typically need not file a return. However, you should check your pre-filled information on myTax Portal. If you need to make changes (such as claiming business expenses), you must submit a full return.
4. No notification received Use the Filing Checker to determine if filing is needed based on your income level.
Common filing errors include late submissions, incorrect income reporting, and missing deduction documentation. These mistakes can result in penalties and interest charges.
InCorp assists self-employed clients with tax filing by reviewing income declarations, optimising allowable deductions, and ensuring timely submission, reducing the risk of costly filing errors.
Claiming Business Expenses Correctly
Proper expense claims directly reduce your taxable income, but IRAS applies strict rules about what qualifies. Only expenses “wholly and exclusively” incurred in producing your income receive approval for deduction.
Allowable Business Expenses
Common allowable expenses include:
- Rental of business premises
- Supplies and materials for your trade
- Business insurance premiums
- Office supplies and stationery
- Business travel (excluding commuting)
- Professional fees related to business
- Utility bills for business premises
Non-Allowable Expenses
IRAS typically rejects these expense claims:
- Personal or domestic expenses
- Capital expenditure (though capital allowances may apply)
- Expenses not supported by receipts
- Parking fines and penalties
- Private vehicle expenses (unless exclusively for business)
- Personal income tax payments
Mixed-Use Assets
For items with both business and personal use, such as mobile phones or home utilities, only the business portion qualifies for deduction. Document your calculation method clearly, showing how you determined the business percentage.
Many self-employed persons lose tax savings by failing to claim all eligible expenses or by claiming items IRAS will reject. InCorp tax experts identify all legitimate deductions and prepare proper documentation to support your claims, maximising tax savings while avoiding costly IRAS adjustments.
Withholding Tax Obligations
Self-employed persons who pay non-residents must follow particular tax rules. When you transfer money to a non-resident for services, interest, royalties, or other named income types, you need to keep back part of the payment and give it to IRAS.
Which Payments Need Tax Withheld
You must hold back tax when paying non-residents for:
- Interest
- Royalties
- Director fees
- Technical service fees
- Management services
- Rent for movable items
Payment Steps
- Take off the right tax amount from what you pay
- Send the tax through e-Filing to IRAS by the 15th day of the second month after payment
- Use the right form for your payment type
The tax rate changes based on payment type and any tax deals between countries. Rates usually run from 1% to 24%.
Many self-employed people overlook these duties. InCorp spots times when you need to withhold tax and sorts out the maths and paperwork, stopping fines for missed payments.
Where to Next With InCorp
Tax filing as a self-employed person brings many tests, from picking the right accounting dates to tracking finances and claiming proper expenses. In our experience, small errors often grow into costly tax problems.
Most people who work for themselves lack both time and tax knowledge while running their business. This creates risks and pulls attention from your main work.
InCorp tax experts work with hundreds of self-employed people across Singapore. We build solid record systems, create accurate financial reports, check expense claims, and manage tax forms. Our help gives you confidence and often spots tax savings you might miss alone.
Contact InCorp today – our team will study your current tax position and offer practical ways to cut risk and boost valid deductions.
FAQs about Income Tax Filing for Self-Employed
What records must self-employed persons keep for IRAS?
- Self-employed persons need full records of all business money in and out, such as invoices, receipts, bank papers, and contracts. Keep all records for at least five years from the tax year they relate to. IRAS won't accept guessed figures, so accurate papers prove key for all expense claims.
How do I know if I should file a 2-line or 4-line statement?
- Your income total sets which form type to use.If your income reaches $200,000 or less, use a 2-line statement showing just your total money in and final profit/loss. If your income exceeds $200,000, you need a four-line statement that includes gross profit and allowable business costs.
Do I need to file taxes if I didn't receive any notification from IRAS?
- With no tax notice received, use the IRAS Filing Checker to see if you must file. This depends on how much you earned. Even when not asked to file, self-employed people might wish to send a return to build a tax history or claim proper business costs. If unsure, ask IRAS or a tax expert.
Get expert personal income tax filing advice now!
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