How to Register as a Sole Trader in the UK (2026 Guide)

Thinking of working for yourself in the UK? Being a sole trader is the simplest way to run a business: you and the business are legally the same, and you pay tax on the profits through Self Assessment. This guide covers how to register with HMRC, the Self Assessment and National Insurance rules for 2026, when Making Tax Digital and VAT apply, and when a limited company makes more sense.

Quick answer

You become a sole trader as soon as you start trading on your own. You must register for Self Assessment with HMRC once your trading income passes £1,000 in a tax year, by 5 October after that tax year ends. HMRC then sends your UTR, and you file a tax return each year by 31 January.

• Registration is free on GOV.UK — you need your National Insurance number and a Government Gateway account

• Income Tax on profit above the £12,570 Personal Allowance, plus Class 4 NI at 6% on £12,570–£50,270

• Making Tax Digital for Income Tax started on 6 April 2026 for qualifying income over £50,000

• Register for VAT if turnover passes £90,000 in any rolling 12 months

What is a sole trader?

A sole trader is a self-employed person who owns and runs their business as an individual. There is no separate legal entity and no Companies House registration. You keep all the profit after tax, make every decision, and are personally responsible for the business's debts. If the business can't pay, creditors can come after your savings or home.

Sole traders can trade under their own name or a business name. The name must not include "limited", "Ltd", "LLP", "plc" or similar, must not be offensive, and must not be too close to an existing trade mark. Your own name and any business name must appear on invoices and letters.

Most freelancers, tradespeople, market traders, hairdressers, tutors, cleaners and online sellers start this way. You can be employed and a sole trader at the same time — your side income is reported on the same tax return.

Sole trader numbers for 2026-27

£1,000

Trading allowance

Register once gross income is above this

£12,570

Personal Allowance

Tax-free income

6%

Class 4 NI main rate

On profits £12,570–£50,270

£90,000

VAT threshold

Rolling 12 months

Do you need to register as self-employed?

HMRC's rule is about income, not about whether you call yourself a business. You must register for Self Assessment as a sole trader if you earn more than £1,000 from self-employment in a tax year (6 April to 5 April). That £1,000 is the trading allowance: income up to that amount is tax-free and doesn't need to be reported.

The test uses gross income — what customers paid you — not profit. A dog-walker who earns £1,400 but spends £600 on a van still needs to register. Above the allowance, you choose between deducting the flat £1,000 or your actual expenses; most people with real costs deduct expenses.

You might choose to register even below the threshold, for example to pay voluntary Class 2 National Insurance, to prove self-employed income for a mortgage or Universal Credit, or to record a loss.

How to register as a sole trader with HMRC

The registration deadline is 5 October after the end of the tax year in which you started. If you started trading between 6 April 2025 and 5 April 2026, that deadline was 5 October 2026 — register now, because HMRC can charge a penalty for late notification. If you started on or after 6 April 2026, you have until 5 October 2027, but registering early gets your UTR in hand and lets you set aside tax from day one.

Register as self-employed in five steps

1. 1

   Check you need to register

   Your gross self-employed income this tax year is over £1,000, or you want to register voluntarily.

2. 2

   Sign in with Government Gateway

   Use the GOV.UK 'Register for Self Assessment' service. If you don't have a Government Gateway user ID, you create one during the process. Have your National Insurance number ready.

   Register for Self Assessment
3. 3

   Enter your business details

   Your start date, the type of work you do, your business name (if any), business address and contact details. Register each new trade from the date it began.

4. 4

   Receive your UTR

   HMRC posts your 10-digit Unique Taxpayer Reference to your home address. Keep it safe — you need it for every tax return and for accountants or software.

   Tip: If you've registered before and didn't file last year, you may need to reactivate your existing record instead of starting again.

5. 5

   Set up your records

   Open a separate bank account, keep every receipt and invoice, and choose bookkeeping software. If your qualifying income is likely to pass the MTD thresholds, pick MTD-compatible software now.

You don't need to register with Companies House, and there is no fee to register with HMRC. Some activities also need a licence (food, alcohol, street trading, taxis, scaffolding) from your local council or a regulator, and some need DBS checks.

Self Assessment deadlines and payments

Once registered, you file a Self Assessment tax return for every tax year. The return covers 6 April to 5 April and works out Income Tax and Class 4 National Insurance on your profit.

Self Assessment calendar for the 2025-26 tax year

5 Oct 2026

Deadline to register if you started trading in 2025-26

31 Oct 2026

Paper tax return deadline

30 Dec 2026

Online deadline if you want the tax collected through your PAYE tax code

31 Jan 2027

Online return deadline; pay the 2025-26 balance and the first 2026-27 payment on account

31 Jul 2027

Second payment on account for 2026-27

Miss the filing deadline and you get an automatic £100 penalty, with further penalties the longer it stays outstanding (including at six months). Interest runs on tax paid late.

Payments on account

After your first year, HMRC usually asks for payments on account: two advance payments towards next year's bill, each half of last year's tax, due 31 January and 31 July. They include Class 4 National Insurance. You don't make them if last year's Self Assessment bill was under £1,000, or if more than 80% of your tax was already collected at source (for example through a PAYE job).

The first January can be a shock: you pay year one's full bill plus half of it again in advance. Set aside 25–30% of profit from the start.

Income Tax and National Insurance for sole traders

You pay tax on profit — income minus allowable expenses such as stock, materials, tools, travel (not commuting), phone, software, insurance, accountancy fees and a share of household bills if you work from home.

Scotland sets its own Income Tax bands for non-savings income, but Class 4 NI is UK-wide. The Personal Allowance reduces by £1 for every £2 of income over £100,000.

What changed with Class 2 National Insurance

Until April 2024 most sole traders paid a flat weekly Class 2 charge. From 6 April 2024 nobody has to pay Class 2. Now:

• Profits at or above the Small Profits Threshold (£7,105 for 2026-27) — you get a qualifying year for State Pension and contributory benefits automatically, at no cost.
• Profits below £7,105 — you can pay voluntary Class 2 at £3.65 a week to keep your record intact. It is one of the cheapest ways to buy a year of State Pension entitlement.

Worked example: £40,000 profit in 2026-27

Priya is a self-employed graphic designer in Leeds with £52,000 of sales and £12,000 of allowable expenses, so her profit is £40,000.

• Income Tax: (£40,000 − £12,570) × 20% = £5,486
• Class 4 NI: (£40,000 − £12,570) × 6% = £1,645.80
• Total: £7,131.80, leaving £32,868.20 — an effective rate of about 17.8%

Her sales of £52,000 also matter: they count as qualifying income for Making Tax Digital, covered next.

Making Tax Digital for Income Tax: does it apply to you?

Making Tax Digital (MTD) for Income Tax is the biggest change for sole traders in years. Instead of one return a year, you keep digital records in compatible software and send HMRC a quarterly update — a summary of income and expenses — then submit your tax return through the software by 31 January.

Whether you're in depends on qualifying income: your self-employment and property income before expenses (turnover) from the Self Assessment return for an earlier year. Employment pay, partnership profit share, dividends and pensions don't count.

The quarterly deadlines are 7 August, 7 November, 7 February and 7 May, each covering the tax year to date (standard periods end on the 5th of July, October, January and April). The first one fell on 7 August 2026; HMRC reported that 436,000 people met it.

For 2026-27 HMRC isn't issuing penalty points for late quarterly updates. From April 2027 a points system applies, and reaching four points triggers a £200 penalty.

In the example above, Priya's £52,000 of sales would put her in MTD from April 2026 if her 2024-25 turnover was similar, even though her profit is only £40,000. A sole trader with £35,000 of 2025-26 sales joins in April 2027. Some people can claim an exemption, for example if they are digitally excluded.

VAT registration for sole traders

VAT is separate from Income Tax. You must register if your taxable turnover in any rolling 12 months passes £90,000, or if you expect to pass it in the next 30 days alone. Under the rolling test you have 30 days from the end of the month you went over to register. You can register voluntarily below the threshold to reclaim VAT on costs — useful if most of your customers are VAT-registered businesses.

Sole trader vs limited company

The other common structure is a private limited company. Here's how they compare in 2026.

Sole trader vs limited company (2026)

	Sole trader	Limited company
Set-up	Register with HMRC, free	Incorporate at Companies House — £100 online
Liability	Unlimited — personal assets at risk	Limited to what you invested (personal guarantees aside)
Tax on profit	Income Tax 20–45% + Class 4 NI	Corporation Tax 19%–25%, then tax on salary/dividends
Taking money out	All profit is yours	Salary via PAYE and dividends (10.75% basic rate above a £500 allowance)
Admin	One Self Assessment return (+ MTD updates if in scope)	Accounts, confirmation statement, Corporation Tax return, payroll
Privacy	Nothing on a public register	Directors and accounts on Companies House

Set-up

Sole trader

Register with HMRC, free

Limited company

Incorporate at Companies House — £100 online

Liability

Sole trader

Unlimited — personal assets at risk

Limited company

Limited to what you invested (personal guarantees aside)

Tax on profit

Sole trader

Income Tax 20–45% + Class 4 NI

Limited company

Corporation Tax 19%–25%, then tax on salary/dividends

Taking money out

Sole trader

All profit is yours

Limited company

Salary via PAYE and dividends (10.75% basic rate above a £500 allowance)

Admin

Sole trader

One Self Assessment return (+ MTD updates if in scope)

Limited company

Accounts, confirmation statement, Corporation Tax return, payroll

Privacy

Sole trader

Nothing on a public register

Limited company

Directors and accounts on Companies House

Using Priya's £40,000 profit, a simplified comparison: as a company paying everything out as dividends, Corporation Tax at 19% is £7,600. The remaining £32,400 as dividends uses her £12,570 Personal Allowance and the £500 dividend allowance, then £19,330 is taxed at 10.75% (£2,078). That is about £9,678 in total — over £2,500 more than as a sole trader, before accountancy fees. Directors usually take a small salary as well, which changes the figures, and at higher profits the company route can win. Dividend tax rates rose by two percentage points from 6 April 2026 (basic rate 8.75% to 10.75%), which made paying out profits as dividends more expensive.

Common sole trader mistakes

• Missing the 5 October registration deadline — set a reminder the day you start.
• Mixing personal and business spending — a separate account makes the return and any HMRC check much easier.
• Not saving for payments on account — budget for your first January bill plus 50%.
• Assuming Class 2 is still compulsory — don't overpay; check your National Insurance record on your personal tax account.
• Judging MTD on profit — the test is turnover.
• Forgetting VAT on a rolling basis — check total sales over the last 12 months every month once you're near £90,000.

Official GOV.UK and HMRC links

• Set up as a sole traderOverview of your responsibilities
• Register for Self Assessment (self-employed)Get your UTR
• Self-employed National Insurance ratesClass 2 and Class 4
• Check if you're eligible for Making Tax Digital for Income TaxThresholds and sign-up
• Self Assessment deadlinesFiling and payment dates
• VAT registrationThreshold and how to register

What to do next

Register with HMRC today if you're over the £1,000 line, then set up a separate bank account and a simple bookkeeping routine. Price your work so tax is covered with the hourly rate calculator, send professional invoices with the free invoice generator, and check VAT on prices with the VAT calculator. Planning to take on staff? Read how to register as an employer first.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

Do I need to register as a sole trader if I only earn a little?

Not if your gross trading income in a tax year is £1,000 or less — the trading allowance covers it and you don't need to tell HMRC. Above that you must register for Self Assessment by 5 October after the end of the tax year you started. You may still want to register below the limit to pay voluntary Class 2 National Insurance.

How long does it take to get a UTR number?

After you register for Self Assessment online, HMRC posts your 10-digit Unique Taxpayer Reference to your home address. Timing varies, so check HMRC's 'when you can expect a reply' tool if it hasn't arrived. Register well before the 5 October deadline so you have the UTR in time to file by 31 January.

Do sole traders still pay Class 2 National Insurance?

No — compulsory Class 2 ended on 6 April 2024. If your profits are at or above the Small Profits Threshold (£7,105 for 2026 to 2027) you get National Insurance credits automatically. Below it you can choose to pay voluntary Class 2 at £3.65 a week to protect your State Pension record. Class 4 is 6% on profits from £12,570 to £50,270.

Does Making Tax Digital apply to me as a sole trader?

It depends on your qualifying income — self-employment plus property turnover before expenses. Over £50,000 on your 2024 to 2025 return meant joining from 6 April 2026; over £30,000 on your 2025 to 2026 return means April 2027; over £20,000 on 2026 to 2027 means April 2028.

Can a sole trader employ staff?

Yes. A sole trader can hire employees but must first register as an employer with HMRC, run PAYE payroll, check right to work, enrol eligible staff into a workplace pension and usually hold employers' liability insurance. See our guide to registering as an employer.

Is it better to be a sole trader or a limited company?

Sole trader is simpler and cheaper to run, and at modest profits usually costs less in tax. A limited company protects personal assets and can be more tax-efficient at higher profits, but needs Companies House filings, a Corporation Tax return and payroll. Many people start as sole traders and incorporate once profits grow.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 7 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Set up as a sole trader — GOV.UK · accessed 7 October 2026
2. 2.Register for Self Assessment if you're self-employed — HMRC / GOV.UK · accessed 7 October 2026
3. 3.Self-employed National Insurance rates — HMRC / GOV.UK · accessed 7 October 2026
4. 4.Check if you're eligible for Making Tax Digital for Income Tax — HMRC / GOV.UK · accessed 7 October 2026
5. 5.Work out your qualifying income for Making Tax Digital for Income Tax — HMRC / GOV.UK · accessed 7 October 2026
6. 6.Use Making Tax Digital for Income Tax — send quarterly updates — HMRC / GOV.UK · accessed 7 October 2026
7. 7.436,000 sole traders and landlords make their tax digital — HMRC · accessed 7 October 2026
8. 8.Self Assessment tax returns — deadlines — GOV.UK · accessed 7 October 2026
9. 9.Payments on account — GOV.UK · accessed 7 October 2026
10. 10.Tax-free allowances on property and trading income — HMRC / GOV.UK · accessed 7 October 2026
11. 11.VAT registration — when to register — HMRC / GOV.UK · accessed 7 October 2026
12. 12.Income Tax rates and Personal Allowances — GOV.UK · accessed 7 October 2026
13. 13.Tax on dividends — GOV.UK · accessed 7 October 2026
14. 14.Income Tax — changes to tax rates for property, savings and dividend income — HM Treasury / HMRC · accessed 7 October 2026
15. 15.Corporation Tax rates — GOV.UK · accessed 7 October 2026
16. 16.Register your company — Companies House / GOV.UK · accessed 7 October 2026
17. 17.Choose your business name (sole trader) — GOV.UK · accessed 7 October 2026
18. 18.Class 2 National Insurance — what's changing from April 2024 — Association of Taxation Technicians · accessed 7 October 2026