How to Register as a Sole Trader: A Step-by-Step Guide for Tradespeople

Introduction

Written for the UK scenario, but the principles apply in most English-speaking nations.

Registering as a sole trader takes about 10 minutes online and costs nothing. You do it by registering for Self Assessment with HMRC. HMRC then sends you a Unique Taxpayer Reference (UTR), and you are officially self-employed.

That part is easy. The mistakes tradespeople make come before and after it: missing the deadline, forgetting the Construction Industry Scheme, mixing business and personal money, and not putting tax aside. This guide covers the registration step by step, then the things that catch new sole traders out in their first year.

Do you need to register as a sole trader?

You must register if your self-employed income goes over £1,000 in a tax year. That £1,000 is the trading allowance, and the tax year runs from 6 April to 5 April. Note that it is income, not profit: £1,000 of work invoiced counts, even if materials ate most of it.

In practice, if you are setting up as a tradesperson, you will pass £1,000 within weeks, so register straight away. You can start trading before your registration is complete.

You also need to register as a sole trader if you are already in Self Assessment for another reason, such as rental income. Your existing registration does not cover a new business.

You do not register with Companies House. That is only for limited companies.

The deadline for registering

You must register by 5 October after the end of the tax year in which you started trading.

You started trading between	Register by
6 April 2025 and 5 April 2026	5 October 2026
6 April 2026 and 5 April 2027	5 October 2027

That sounds like plenty of time, but don’t wait. If you register late, HMRC can charge a penalty based on the tax you owe. Registering early also means your UTR and online account are ready long before your first tax return is due on 31 January.

If you do register after 5 October, HMRC will set you a different filing deadline, three months from the date of its letter. The 31 January date for paying your tax does not move.

How to register as a sole trader: step by step

Have these ready before you start: your National Insurance number, an email address, your home address, the date you started (or will start) trading, and photo ID such as a passport or driving licence for the identity check.

1. Go to the GOV.UK page “Set up as a sole trader” (gov.uk/become-sole-trader) and choose the option to register.
2. Sign in, or create sign-in details if you have never used HMRC online services. You will set up two-step verification using your mobile phone.
3. Choose “sole trader” as the reason for registering. Do not pick the “not self-employed” route.
4. Enter your personal details, your trade, and the date you started self-employment.
5. If you work in construction for contractors, register for the Construction Industry Scheme (CIS) when the form offers it. See the CIS section below.
6. Check your answers and submit. Make a note of any reference HMRC gives you on screen.

That is the registration done. There is no fee, and you do not need an accountant to do it.

What happens after you register

Your UTR arrives by post. This is a 10-digit Unique Taxpayer Reference, and it usually takes around 15 days. Keep it safe. You will need it for every tax return, and contractors will ask for it before they pay you under CIS.

Set up your Self Assessment online account. Once the UTR arrives, sign in to your HMRC account and make sure Self Assessment is listed. This is where you will file your tax return and see what you owe.

National Insurance is handled through your tax return. You no longer pay Class 2 National Insurance as a separate bill. Class 4 National Insurance is worked out on your profits above £12,570 and paid along with your income tax. If your profits are low, you may want to pay voluntary Class 2 contributions to protect your State Pension record.

Five extra steps for tradespeople

1. Register for CIS if you work for contractors

If you do construction work for a contractor, they must deduct tax from your pay under the Construction Industry Scheme. Registered subcontractors have 20% deducted. Unregistered subcontractors have 30% deducted. On a £2,000 job, that is £200 more held back from you until your tax return is settled. Registering costs nothing, so do it when you register as a sole trader.

If you only work directly for homeowners, CIS does not apply.

2. Choose your business name

You can trade under your own name or a business name, such as “Smith Electrical Services”. The name cannot include “Limited” or “Ltd”, and some words need permission. If you use a business name, your quotes and invoices must still show your own name and a business address. Check the name is not already someone’s trade mark before you pay for a van livery.

3. Open a separate bank account

The law does not require a business account for sole traders, but your bank’s terms may. More importantly, keeping business money separate makes your records far easier and stops you spending the tax you owe.

4. Get insurance

Public liability insurance is not a legal requirement, but most commercial clients, councils and letting agents will not use you without it. If you take on an employee, even part-time, employers’ liability insurance becomes a legal requirement.

5. Keep records from day one

Record every sale and every business expense, and keep your receipts. You must keep these records for at least five years after the 31 January deadline for that year’s tax return. Doing it weekly takes minutes; doing it in January takes days.

Making Tax Digital: what it means for new sole traders

Making Tax Digital (MTD) for Income Tax replaces the single yearly tax return with quarterly updates sent from approved software. It is being brought in by income level:

Your yearly income from self-employment (and property)	MTD applies from
Over £50,000	6 April 2026
Over £30,000	6 April 2027
Over £20,000	6 April 2028

The threshold is based on your income (turnover) before expenses, not your profit, and HMRC uses your tax return from an earlier year to decide whether you are in. Most full-time tradespeople will be caught by 2028.

The sensible move for a new sole trader is to keep digital records from the start, using an app or spreadsheet that works with MTD software. You will then be ready when HMRC writes to you, rather than changing systems mid-year.

Put tax aside from your first job

As a sole trader, nobody takes tax off your earnings for you (except under CIS). You pay it all in one go, which is why so many tradespeople get a nasty shock in their second January.

There are two reasons that first bill hurts:

• It covers a whole year at once. Your first tax bill, due on 31 January, covers everything you earned in your first tax year.
• Payments on account start at the same time. If your bill is over £1,000, HMRC also asks for half of next year’s estimated bill in advance, on the same 31 January, with the other half due on 31 July. Your first January payment can be roughly one and a half times a normal year’s tax.

The simple fix is to move a fixed percentage of every payment you receive into a separate savings account the day it arrives. Our free Tax & VAT Set-Aside calculator works out the right percentage for your earnings: www.tradeskillshubacademy.com/profit-tools.

Frequently asked questions

How do I register as a sole trader?

Register for Self Assessment on GOV.UK, choosing the sole trader route. It takes about 10 minutes, it is free, and HMRC posts your UTR within a few weeks.

Can I be employed and a sole trader at the same time?

Yes. Many tradespeople start this way, doing private work in the evenings and at weekends. Your employer keeps taking tax through PAYE, and you declare your self-employed income on your tax return.

Do I need to register for VAT?

Only when your VAT-taxable turnover goes over £90,000 in any rolling 12 months. You can register voluntarily below that, but for most tradespeople working for homeowners it just adds 20% to their prices.

Do I need an accountant?

No, not to register or to file a simple tax return. Many new sole traders do their first year themselves. An accountant earns their fee when your business grows, you take on staff, or you are weighing up becoming a limited company.

What if I stop trading?

Tell HMRC you have stopped being self-employed. You will still need to file a tax return for the year you stopped.

Your next step

Registering makes you a business on paper. Making a profit is the harder part, and most tradespeople who struggle do so because they never worked out what their time really costs.

The Complete Guide to Running a Profitable Trade Business takes you through working out your true costs, setting a charge-out rate that covers them, pricing materials and quoting with confidence. It comes with free calculators and templates at www.tradeskillshubacademy.com/profit-tools.