How Do I Register as a Sole Trader? – Basic Guide
It is a fact that there are many benefits of establishing your own business. That’s where the sole proprietorship, the most basic business structure, comes in. Being your own boss allows you to work from home, make your own decisi
To register as a sole trader in the UK, you register for Self Assessment with HMRC online by 5 October after the end of the tax year in which you started. HMRC then sends you a Unique Taxpayer Reference (UTR) and an activation code for your online account, and you file a tax return and pay tax each year. You do not need to register a company or a trading name.
This guide walks you through each step, from deciding whether to use the trading allowance to registering for VAT, choosing a name, getting insured and meeting local licensing rules in London. For the ongoing obligations, see our Self Assessment guide and self-employed packages.
What is a sole trader?
A sole trader is a self-employed individual who runs their own business and is personally responsible for it. You keep all the profit after tax, but you are also personally liable for business debts. There is no separate legal entity and little formal paperwork, which is why it is the most common starting point for freelancers, tradespeople and small service businesses.
Fixed-fee Self Assessment from £149 + VAT, paid online.
See self-employed packagesBook a free callStep-by-step: how to register as a sole trader
- Check whether you need to register. If your gross trading income is £1,000 or less in a tax year, the trading allowance may cover it. If it is more, you must register and file a return. See our guide to the trading allowance.
- Register for Self Assessment online through GOV.UK by 5 October following the end of the tax year in which you started trading.
- Receive your UTR. HMRC posts it, usually within about 10 working days, and sends an activation code for your online account a little later. Read what a UTR is.
- Activate your online account using the code, so you can file returns and view your tax.
- Open a business bank account to keep business and personal money separate.
- Set up bookkeeping and a way to record income and expenses.
- Check other registrations, such as VAT, insurance and local licences.
Tax and National Insurance for sole traders
| Item | 2026/27 position |
|---|---|
| Income tax | 20% on profit above the £12,570 personal allowance up to £50,270, then 40% and 45% |
| Class 4 National Insurance | 6% on profits between £12,570 and £50,270 and 2% above |
| Class 2 National Insurance | No longer compulsory. Profits above the small profits threshold give you a National Insurance credit; voluntary contributions are available |
| Payments on account | Two advance payments on 31 January and 31 July if your bill is over £1,000 |
| Return and payment deadline | 31 January after the tax year |
Use our self-employed tax calculator to estimate what you will owe and set money aside each month.
Do you need to register for VAT?
You must register if taxable turnover exceeds £90,000 in any rolling 12 months, or you expect it to in the next 30 days. You can also register voluntarily, which may help if your customers are VAT-registered businesses. Read how to register for VAT.
Choosing a business name
You can trade under your own name or a business name. You cannot use a name that includes Limited, Ltd or similar, implies a connection with government or a regulated body without permission, or is offensive or misleading. You do not have to register a trading name, but you should check that it is not already in use and does not infringe a trademark. Your own name and address should appear on business documents if you use a different trading name.
Insurance, data protection and licences
- Insurance: consider public liability, professional indemnity and cover for equipment. Some trades or clients require it.
- Data protection: if you store personal data about customers, you may need to pay the ICO data protection fee. Check whether you must register.
- Licences and registrations: some activities need a licence, such as taxi and private hire, street trading, alcohol sales and some trades.
- Food businesses: you must register with your local council at least 28 days before you start trading.
Records you need to keep
Keep records of all sales and expenses, bank statements, invoices and receipts, and a record of mileage and home-working costs if you claim them. Keep them for at least five years after the 31 January deadline for the tax year. If your qualifying income is above the Making Tax Digital threshold, you will also need digital records and quarterly updates. See our guide to Making Tax Digital for sole traders and allowable expenses.
Registering as a sole trader in London
London sole traders often need borough-specific permissions, such as street trading consents, market licences, taxi and private hire licensing from Transport for London and food business registration with the local council. Many also use co-working spaces, which are allowable business costs. We help new sole traders across every borough register correctly and file their first return. See Camden, Hackney or Croydon, or browse self-employed accountants by borough.
A first-month checklist
- Register for Self Assessment.
- Open a business bank account.
- Set up bookkeeping and a tax savings account.
- Arrange insurance and any licences.
- Create an invoice template.
- Diary your key dates: 5 October, 31 January and 31 July.
Common mistakes new sole traders make
- Missing the 5 October registration deadline.
- Not setting money aside for tax and National Insurance.
- Mixing personal and business spending.
- Forgetting to keep receipts.
- Not checking whether MTD or VAT applies.
A worked example of a first-year bill
A new sole trader in London starts in September 2026 and earns £24,000 of profit in the 2026/27 tax year. After the personal allowance of £12,570, taxable profit is £11,430, so income tax is about £2,286. Class 4 National Insurance at 6% on the same band is about £686. The total is roughly £2,972, due by 31 January 2028 along with the first payment on account, which is half of the bill. Because there are no payments on account in the first year, the first January bill is the balance for the year, and then the second year includes a payment on account. Setting aside about 12% to 15% of income each month would cover it.
When to consider a limited company instead
If you expect to take on staff, work with larger clients who prefer companies, or carry significant business risk, a limited company may suit you better than being a sole trader. Many people start as sole traders and incorporate later. Read our comparison of sole trader or limited company.
Frequently asked questions
Do I need to register as a sole trader?
Yes, if your gross trading income is more than £1,000 in a tax year you must register for Self Assessment.
When must I register?
By 5 October after the end of the tax year in which you started trading.
How long does it take to get a UTR?
Usually about 10 working days by post, plus time for the activation code.
Do I need to register a business name?
No. You can trade under your own name or a trading name without registering it, but it must follow the naming rules.
Do sole traders pay National Insurance?
Yes, Class 4 at 6% and 2% on profits above £12,570. Class 2 is no longer compulsory.
Fixed fees, paid online. Call 020 3441 1258 or get your quote now.
Related guides
Self-employedSelf-Employed Allowable Expenses: What You Can Claim (2026/27)A clear list of the business expenses self-employed people can claim, plus the trading allowance and simplified expenses.
Self-employedHow to File a Self Assessment Tax Return (2026/27 Guide)A step-by-step guide to filing a Self Assessment tax return in the UK, with deadlines, penalties and payments on account.
Self-employedMaking Tax Digital for Sole Traders: What You Need to DoHow Making Tax Digital for Income Tax works for sole traders, who is in scope in 2026, 2027 and 2028, and how…