Registering as a sole trader is one of the quickest and simplest ways to start working for yourself in the UK. The process is free, it’s done online, and most people can complete it in under 20 minutes. Here’s exactly what to do and what to expect.
Public liability insurance
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What is a sole trader?
A sole trader is a self-employed individual who runs a business in their own name. You and the business are the same legal entity, which means less paperwork and simpler tax returns — but also means you’re personally responsible for any business debts.
The main advantages:
- Free and fast to set up
- Full control over your business
- Straightforward tax return each year
- Keep all profits after tax
The main drawbacks:
- Unlimited personal liability — your personal assets could be at risk if the business runs into debt
- Can be harder to raise funding or win certain contracts
- No separation between personal and business finances unless you choose to create one
Not sure whether sole trader or limited company is the right structure for you? Take a look at our guide to sole trader vs limited company.
When do you need to register?
You must register as a sole trader with HMRC if your self-employed income exceeds £1,000 in a tax year. The deadline is 5 October following the end of the tax year in which you started — so if you began working for yourself in the 2025 to 2026 tax year, you must register by 5 October 2026.
If you earn under £1,000, registration isn’t required but you can still register voluntarily — for example, to provide proof of self-employment or to build up your National Insurance record.
How to register: step by step
1. Decide whether sole trader is right for you
Before you register, make sure the structure fits your situation. If you plan to take on significant financial risk or grow quickly, a limited company may offer better protection. If you’re starting small and want simplicity, sole trader is usually the right choice to begin with.
2. Choose your business name
You can trade under your own name or choose a separate business name. If you use a trading name it must appear on all your invoices and official paperwork. It cannot include “Ltd”, “LLP” or similar terms that imply a different structure, and it must not be offensive or already trademarked. You can check name availability using the Companies House name checker.
3. Gather what you’ll need
Have the following ready before you start:
- Your National Insurance number
- Full name, date of birth, and address
- Your business name if different from your own name
- The nature of your business
- The date you started trading
4. Register with HMRC
Go to GOV.UK and register for Self Assessment as a self-employed person. You can also register by calling HMRC on 0300 200 3310 or by completing a paper CWF1 form and posting it, though online is quicker.
5. Receive your UTR
Once registered, HMRC will post your Unique Taxpayer Reference — a 10-digit number you’ll use every year to file your tax return. This typically arrives within 10 working days, or up to 21 days if you’re based overseas. Keep it somewhere safe.
6. Set up record-keeping
From the moment you start trading, keep records of all income and expenses. Good records make your tax return simpler and reduce the chance of errors. Many sole traders use basic spreadsheets to start; accounting software like Xero or QuickBooks can help as things grow.
7. Understand your tax obligations
As a sole trader, you’ll file a Self Assessment tax return each year and pay income tax and National Insurance on your profits. The key dates and deadlines are covered below.
Tax as a sole trader
Income tax
You pay income tax on profits above your personal allowance (£12,570 for 2024/25). The rates in England, Wales, and Northern Ireland are:
- 20% on profits between £12,571 and £50,270
- 40% on profits between £50,271 and £125,140
- 45% on profits above £125,140
If you’re based in Scotland, different income tax bands apply — check the Scottish Government’s guidance for the current rates.
National Insurance
You pay Class 4 National Insurance on your profits. The current rates for 2024/25 are 6% on profits between £12,570 and £50,270, and 2% on profits above that. Class 2 NICs, which used to be a flat weekly charge, were abolished for most self-employed people from April 2024.
VAT
You must register for VAT if your annual turnover exceeds £90,000. You can also register voluntarily if your turnover is below that threshold, which can be useful if your clients are VAT-registered businesses.
Self Assessment deadlines
Paper tax returns: 31 October following the end of the tax year. Online tax returns: 31 January. Set aside money as you earn rather than trying to find the full tax bill at the end of the year — an unexpected payment on account in your second year can catch people out.
What does it cost?
Registering as a sole trader is free. The main ongoing costs to factor in are:
- Accounting software or an accountant’s fees
- Public liability and any other business insurance you need
- Any optional professional memberships relevant to your trade
Insurance for sole traders
Once you’re trading, you’ll need to think about insurance. The most relevant cover for most sole traders is public liability insurance — it protects you if a client or member of the public is injured or their property is damaged as a result of your work.
Some trades and contracts require you to have it in place before you can work. Others involve you deciding for yourself whether the level of risk warrants it. For most sole traders who interact with clients or the public in any way, it’s worth having.
If you take on any staff — even part-time or casual workers — employers’ liability insurance becomes a legal requirement. You can read more in our guide to can a sole trader have employees.
If you want to understand whether IR35 affects you as a sole trader, take a look at our guide to does IR35 apply to sole traders.
Get a sole trader insurance quote from insurd today.
Ready to get started?
Registering as a sole trader takes minutes and costs nothing. The most important things are to register before the October deadline, keep accurate records from the start, and set aside money for your tax bill as you earn. Get those habits in place early and the rest follows naturally.
For a broader look at what self-employment involves, take a look at our guide to how to register as self-employed.
Get a sole trader insurance quote from insurd and make sure your business is properly covered from day one.
Frequently asked questions
Can I be employed and a sole trader at the same time?
Yes. You can have a full-time or part-time job and also run a sole trader business. Your employed income is taxed through PAYE, and your self-employed profits are declared separately through Self Assessment.
Do I need a separate business bank account?
It’s not a legal requirement, but it’s strongly recommended. Keeping business and personal finances separate makes your record-keeping much simpler and reduces the chance of errors in your tax return.
What happens if I don’t register?
If you earn over £1,000 and don’t register, HMRC can issue penalties and charge interest on any unpaid tax. It’s always better to register promptly rather than wait.
Can I switch to a limited company later?
Yes, and many businesses do. Read our guide to sole trader vs limited company for a full breakdown of when it makes sense to make the switch.
Do I need to register if I earn under £1,000?
Not legally. But voluntary registration can be useful if you want proof of self-employment or to protect your National Insurance record for State Pension purposes.
