Guide · Any country · Tax

Closing your freelance business? The final tax steps with the IRS, HMRC and the CRA (US, UK, Canada)

Taking a job, retiring, moving on or just stopping? Closing a one-person freelance business is mostly paperwork: a final tax return, closing any registrations you have, dealing with equipment you still own, and keeping your records for long enough afterwards. Here's what the IRS, HMRC and the CRA say you have to do.

General information, not tax or legal advice. Not written or reviewed by a lawyer or an accountant. The short answer, the side-by-side summary, the steps, the checklist, the wording to copy and all the other wording are ours; the official items come from the US, UK and Canadian government pages linked below. This page is for a self-employed person working on their own (a sole proprietor or sole trader). It doesn't cover closing a company, LLC taxed as a corporation or partnership, selling a business as a going concern, bankruptcy or insolvency, a death, US states, Quebec or other countries. It says nothing about whether you should close. Official pages were read on 2026-10-18.

The short answer

In the US, the IRS says you must file a final return for the year you close; for a sole proprietor that's Schedule C with your individual return, plus other forms if they apply.
In the UK, you must tell HMRC you've stopped trading and send a final Self Assessment return, and cancel your VAT registration if you have one.
In Canada, you report business income for your final fiscal period, close the CRA program accounts you have (such as GST/HST), and file a final GST/HST return if you were registered.
Selling business equipment can change your final-year figures in all three countries; in the UK, keeping it for personal use counts as disposing of it too.
Records still have to be kept for years after you close.
Ask an adviser if you have a loss, equipment, staff or a sales tax registration.

1. United States: the IRS

A final return: "You must file a final return for the year you close your business." "A sole proprietor is someone who owns an unincorporated business by themselves." "File Schedule C (Form 1040 or Form 1040-SR), Profit or Loss From Business, with your individual tax return for the year you close your business." (IRS: Closing a business, page date 21-Jul-2026). More in Schedule C for US freelancers.
Forms that may come with it: "You may also need to file the following forms. You should file these when you file your individual tax return."
- "Form 4797, Sales of Business Property, for each year you sell or exchange property used in your business."
- "Form 8594, Asset Acquisition Statement, if you sell your business."
- "Schedule SE (Form 1040), Self-Employment Tax, if you have net earnings of $400 or more from your business."
Self-employment tax itself: see US self-employment tax.
State taxes: "Remember to check your state responsibilities when closing a business."
Paying: "See Paying Your Taxes for ways to pay the tax you owe." If you can't pay in full, see can't pay your tax bill?
Staff and contractors: "If you have one or more employees, you must pay them any final wages and compensation owed." The same page lists the payroll forms. For contractors you paid in the year you close, it says to report the payments: "Use Form 1099-NEC, Nonemployee Compensation." Its dollar threshold may be out of date (see Where the sources differ); the current one is in Form 1099-NEC for US freelancers.
If your business has an EIN: the closing page says "To cancel your EIN and close your IRS business account, you need to send us a letter that includes:"
- The complete legal name of the business
- The business EIN
- The business address
- The reason you wish to close the account
"We cannot close your business account until you have filed all necessary returns and paid all taxes owed." The IRS page on EINs words it differently: "If you no longer need your employer identification number (EIN), we can’t cancel it, but we can deactivate it." "Once we assign an EIN to a business entity, it becomes that entity’s permanent federal taxpayer ID number." "If you made tax payments, owe business taxes or received a notice to file a business tax return, you must file all outstanding tax returns and pay taxes owed before we can deactivate your EIN." (IRS: If you no longer need your EIN, page date 05-Nov-2025). The two pages give different mailing addresses; check the IRS site before you write.
Records: "How long you need to keep your business records depends on what’s recorded in each document." "Property records: Generally, keep records relating to property until the period of limitations expires for the year in which you dispose of the property." "Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out." "The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax." "When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes." (IRS: How long should I keep records?, page date 30-Jun-2026).

2. United Kingdom: HMRC

Tell HMRC: "You must tell HM Revenue and Customs (HMRC) if you’ve stopped trading as a sole trader or you’re ending or leaving a business partnership." "You’ll also need to send a final tax return." "Use this online service to tell HMRC you’ve stopped self-employment. You can also use it to tell HMRC you no longer need to send a Self Assessment tax return." (GOV.UK: Stop being self-employed, page date 2014-11-21). The online service is linked from that page.
The final return: "You must send a Self Assessment tax return before 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 - 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 can hire a professional (for example an accountant) if you need help with your tax return." The return itself: see UK Self Assessment for freelancers.
Reliefs GOV.UK lists: "You may be able to reduce your final tax bill by claiming:"
- Business Asset Disposal Relief - this can reduce the amount of Capital Gains Tax you have to pay
- overlap relief - this can prevent you 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
HMRC's current helpsheet adds: "If your trade ceased in 2025 to 2026 and you made a loss in your final 12 months of trading, you can claim terminal loss relief against your profits from the same trade." "If your business ceased in 2025 to 2026 all of the remaining transition profits will be included in your taxable profits for 2025 to 2026." (HMRC helpsheet HS222: How to calculate your taxable profits, page date 2026-04-07). On overlap relief, see Where the sources differ.
Equipment: "You dispose of an asset if you:"
- sell it
- give it away as a gift or transfer it to someone else
- swap it for something else
- get compensation for it - like an insurance payout if it’s been lost or destroyed
- use it for anything other than your business
- close your business
"Use the market value (the amount you’d expect to sell it for) if you:"
- gave it away
- kept it to use for something other than your business
- sold it for less than it was worth to someone who’s unable to claim allowances
"In the year you close your business, enter a balancing charge or a balancing allowance on your tax return instead of claiming capital allowances." "You can only get a balancing allowance in your main or special rate pool when you close your business. You can get a balancing charge in any pool in any year." (GOV.UK: Capital allowances when you sell an asset, page date 2024-11-13). The helpsheet puts it this way: "If you’ve claimed capital allowances, an adjustment, known as a balancing charge, may arise when you sell an asset, give it away or stop using it in your business."
VAT, if you're registered: "You must cancel your VAT registration if you or your partnership are registered." "You must cancel your registration if you’re no longer eligible to be VAT registered. For example:"
- you stop trading or making VAT taxable supplies
- you join a VAT group
"You must cancel within 30 days if you stop being eligible or you might be charged a penalty." "You’ll have to submit a final VAT Return for the period up to and including the cancellation date." "You must account for any stock and other assets you have on this date if both of the following apply:"
- you reclaimed or could have reclaimed VAT when you bought the assets
- the total VAT due on these assets is over £1,000
"Do not wait until you’ve received all your invoices before submitting your final return. When you get them you’ll still be able to reclaim VAT." "HMRC will contact you to confirm your cancellation. This will usually be within 40 working days, although it may take longer during busy periods." "You must stop charging VAT from the cancellation date. You’ll need to keep all VAT records for 6 years." (GOV.UK: Cancel your VAT registration, page date 2024-10-10). The thresholds are in our guide to the UK VAT registration threshold.
Staff: "You need to close your PAYE scheme and send final payroll reports to HMRC if you stop employing staff."
Debts: "You’ll usually be personally liable for your business debts." The same page points to options if you're insolvent.
Records: "You must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year." (GOV.UK: Business records if you’re self-employed: how long to keep them, page date 2015-01-23). VAT records have their own period, quoted above.

3. Canada: the CRA

Your final business income: "A fiscal period cannot be longer than 12 months. However, it can be shorter than 12 months in some cases, such as when a new business starts or when a business stops." (CRA: Guide T4002, general information (fiscal period), page date 2026-04-16). Business income goes on the statement of business or professional activities: see Form T2125 for Canadian freelancers.
Equipment: "If you claim CCA and you later dispose of the property, you may have to add an amount to your income as a recapture of CCA. Alternatively, you may be able to deduct an additional amount from your income as a terminal loss." "More precisely, you may have a terminal loss when, at the end of a fiscal period, there is no longer any property in the class, but there is still an amount you have not deducted as CCA." (CRA: Guide T4002, capital cost allowance, page date 2026-04-16).
Your business number accounts: "When you decide to close your business and no longer need your business number (BN), you have to fill in certain forms before the accounts can be closed." "Each business account has its own procedures, such as how to meet filing obligations and make payments." For payroll, the page starts "Before closing your payroll account, you must:" and lists remitting source deductions, pension adjustments, final information returns and slips (CRA: Closing CRA program accounts, page date 2026-07-27).
GST/HST, if you're registered: "If you decide to close your GST/HST account, you must notify the Canada Revenue Agency (CRA) and provide the reason for closing it. You will also need to file a final GST/HST return and remit any amounts you owe." "When you are ready to close (deregister) your GST/HST account, you will need all of the following information:"
- business number (BN)
- legal name of the business
- cancellation date
- reason for closing the GST/HST account
"Your cancellation date is the day your business closes." By mail: "Fill out Part B and other applicable sections on Form RC145, Request to Close Business Number Program Accounts." (CRA: Close your GST/HST account, page date 2026-06-16). Online, you can close it through the CRA's business sign-in.
GST/HST after closing: for property you still hold, "Remit (pay) the GST/HST on the fair market value of each of these properties just before you close your account. Report this GST/HST on your final return." For capital property, "Generally, all or part of the input tax credits previously claimed on this property have to be repaid." "You are considered to have 2 separate reporting periods when you close your account. You may have to file 2 returns, including:"
- a return for a reporting period that ends the day before you close your GST/HST account
- a return for a reporting period that begins the day you closed your GST/HST account and ends on the last day of that month (this only required if you have tax to remit for that period)
Registration and set-aside: see GST/HST: when to register and how much to set aside.
Records: "When a non-incorporated business or other organization ends, it must keep its records for six years from the end of the tax year in which the business or organization ended." "Generally, you must keep all required records and supporting documents for a period of six years from the end of the last tax year they relate to." "If you want to destroy your books of account and records earlier than the retention period specified in How long to keep your records, you first must get written permission from the CRA." (CRA: Where to keep your records, for how long, page date 2026-08-03).

4. Side by side

Our summary of sections one to three, not official wording.

Question	United States	United Kingdom	Canada
Telling the tax agency	The IRS closing page lists a final return rather than a separate notice; a letter closes an EIN account if you have one	Tell HMRC you have stopped self-employment, online	Close each CRA program account you have, such as GST/HST or payroll
Final income tax return	Schedule C with your individual return for the year you close, plus Schedule SE if it applies	A Self Assessment return with your final profit or loss	Your business income for the final fiscal period, which can be shorter than usual
Business equipment	A sales of business property form for business property you sell or exchange	A balancing charge or allowance instead of capital allowances; keeping an item for yourself counts as disposing of it	A possible recapture of capital cost allowance, or a terminal loss
Sales tax registration	Not on the IRS pages; check your state	Cancel VAT registration in time, then send a final VAT Return	Close the GST/HST account, file the final return or returns, and account for property you still hold
A loss in the final year	Not covered on the pages we read, beyond a link on net operating losses	Terminal loss relief may set it against earlier profits	A terminal loss on equipment may be deductible
Staff and contractors	Final payroll forms, and information returns for contractors you paid	Close the PAYE scheme if you employ staff	Final remittances and slips before closing the payroll account
Records afterwards	Until the period of limitations runs out; property records can need longer	At least five years after the January filing deadline for the tax year	Six years from the end of the tax year the business ended

5. Earning very little instead of closing

UK: "You do not need to be registered as self-employed if you earn £1,000 or less in a tax year as a sole trader." "But you can choose to stay registered to:"
- prove you’re self-employed, for example to claim Tax-Free Childcare
- make voluntary Class 2 National Insurance payments
"If you decide to stop being self-employed because you’ll earn £1,000 or less, tell HMRC after the end of the last tax year you were self-employed." (GOV.UK: Stop being self-employed).
Canada, GST/HST: "If your total taxable revenues fall below the small-supplier limit calculation amount, you may decide to deregister your GST/HST account. In this case, you need to be registered for at least one full year before you ask to close your account." "If you stop making taxable supplies, you no longer need to be registered. You can ask the CRA to close your GST/HST account." (CRA: Close your GST/HST account).
US: the IRS pages we read don't describe pausing a business. Whether side work is still a business is covered in hobby or business?

6. Step by step

Our order of steps, based on sections one to three — not an official checklist.

Pick a closing date and write it down: the agencies ask for it in different places.
Finish or hand over open work, send your final invoices and chase anything unpaid while clients still expect to hear from you.
Tell clients and suppliers you are closing, and cancel services and subscriptions you no longer need.
If you are registered for VAT or GST/HST, cancel or close that registration and note when the final return is due.
If you employ anyone or paid contractors this year, follow the payroll and information-return steps on the official pages.
List the equipment you still own and decide what you will sell, give away or keep for personal use, with a value and a date for each.
In the UK, tell HMRC you have stopped self-employment.
File the final income tax return for the year you close, with any final-year forms that apply to you.
Pay what you owe, or ask about a payment plan if you cannot pay in full.
If you have an EIN or a CRA business number you no longer need, close those accounts too; the IRS says it can only close an EIN account once the returns are filed and the tax is paid.
Keep your records for the full period each agency sets, counted from the dates it gives.
Ask an accountant or a tax adviser before you close if you have losses, equipment, staff or a VAT or GST/HST registration.

For the last invoices, see wrapping up a project and chasing an unpaid invoice. Thinking of carrying on as a company instead? See sole trader vs limited company, LLC or corporation.

7. Wording to copy

Replace everything in [brackets]. This is ours, not from any agency, and it's not legal or tax advice.

Telling a client you're closing

Subject: [your business name] is closing on [closing date]

Hi [client name],

I'm closing [your business name] on [closing date]. Here is what that means for our work:
- Open work: [what will be finished, handed over or stopped, and by when]
- Final invoice: [invoice number], due [due date], paid to the same account as before
- Files and access: [what I'll send back or delete, and by when]

My payment details are not changing. If you get a message saying they have, please check with me by [phone / video call] first.

Thank you for working with me.
[your name]

A closing notice is a moment scammers use to send fake "new bank details": see "our bank details have changed".

A closing record for your files

Business closing record
Closing date: [date, with the month written as a word]
Last invoice issued: [invoice number and date]
Registrations closed: [VAT / GST/HST / payroll / EIN / business number] on [date], reference [confirmation reference]
Tax agency told: [HMRC / CRA / IRS] on [date], by [online service / letter]
Equipment: [item], [sold / given away / kept for personal use] on [date], value [amount] [currency code]
Final returns: [return name] for [tax year], filed on [date]
Records kept until: [date], stored at [location]

8. Closing checklist

Our summary of the official pages above, not an official checklist.

Your closing date, and the date of your last invoice
Final invoices sent, and what is still unpaid
Each tax registration you hold, and when it was closed
An equipment list: what you sold, gave away or kept, with dates and values
Final returns filed: income tax, and VAT or GST/HST if you were registered
Letters or messages from the IRS, HMRC or the CRA confirming what was closed
Invoices, expenses, bank statements and receipts for the final year
A note of how long each set of records has to be kept

Free tools and kits

Our free invoice generator and expense and receipt log run in your browser; nothing you type is sent or saved. Neither one files a return or closes an account.
Our paid Freelance Billing Kit by Small Rows (US$12, one-time) keeps invoice and expense history you can use for a final return: the Invoices tab lists each invoice's number, client, issue date, amount paid and paid date, and the Expenses tab logs each cost with yearly totals by category. It doesn't file a final return, tell HMRC you've stopped, close a VAT, GST/HST, payroll or EIN account, work out balancing charges, recapture or terminal losses, or store receipts and bank statements.
All three kits together: the All-Kits Bundle by Small Rows (US$24, one-time).

Where the sources differ

Telling the agency: GOV.UK asks you to tell HMRC you've stopped; the IRS closing page lists a final return and, for an EIN, a letter; the CRA works account by account (GST/HST, payroll and others).
EIN wording: the IRS closing page says "cancel your EIN"; the IRS page on EINs says it can't be cancelled, only deactivated, and gives other mailing addresses.
Contractor threshold: the IRS closing page still shows an older dollar threshold for reporting contractor payments. Our Form 1099-NEC guide covers the newer threshold from the IRS instructions.
Overlap relief: the GOV.UK stop page still lists it. HMRC's guidance on the change to the tax year basis says: "If you report profit covering more than 12 months, the excess is known as ‘transition profit’. This can be reduced by Overlap Relief and any remaining profit will be spread over the following years, up to the tax year 2027 to 2028." "Include your overall transition profit and Overlap Relief in your 2023 to 2024 Self Assessment tax return." (GOV.UK: Changes to reporting income from self-employment and partnerships, page date 2023-09-11). The current helpsheet doesn't mention overlap relief. Ask an adviser whether any of it still applies to you.
Page dates: the GOV.UK stop and records pages carry old dates in their metadata even though their text has been revised since; the dates in Sources are those metadata dates.
What we did not check: US state rules; IRS rules on net operating losses; HMRC helpsheets on losses and Capital Gains Tax reliefs in detail; Revenu Québec; provincial business registrations; companies, partnerships and LLCs; selling a business; other countries.

When to get advice

you made a loss in your final year, or in recent years;
you own equipment, a vehicle or other assets you claimed allowances or depreciation on;
you're registered for VAT or GST/HST, or you employ anyone;
you're selling the business or its client list, or moving the work into a company;
you owe tax you can't pay, or business debts you can't cover;
you live in one country and your clients are in another.

Talk to an accountant or a tax adviser where you file. This page is general information only.

Sources

United States: IRS: Closing a business (page date 21-Jul-2026) · IRS: If you no longer need your EIN (page date 05-Nov-2025) · IRS: How long should I keep records? (page date 30-Jun-2026)
United Kingdom: GOV.UK: Stop being self-employed (page date 2014-11-21) · GOV.UK: Register for VAT: Cancel your VAT registration (page date 2024-10-10) · GOV.UK: Capital allowances when you sell an asset (page date 2024-11-13) · GOV.UK: Business records if you’re self-employed: how long to keep your records (page date 2015-01-23) · HMRC helpsheet HS222: How to calculate your taxable profits (page date 2026-04-07) · GOV.UK: Changes to reporting income from self-employment and partnerships (page date 2023-09-11)
Canada: CRA: Closing CRA program accounts (page date 2026-07-27) · CRA: Close your GST/HST account (page date 2026-06-16) · CRA: Guide T4002, general information (fiscal period) (page date 2026-04-16) · CRA: Guide T4002, capital cost allowance (page date 2026-04-16) · CRA: Where to keep your records, for how long and how to request the permission to destroy them early (page date 2026-08-03)

Checked 2026-10-18. Found a mistake? Tell us via Support.