Register as a sole trader with HMRC: step-by-step guide

Published Monday 20 April 2026

Table of contents

• What is a sole trader?
• Pros and cons of being a sole trader
• When do you need to register as a sole trader?
• How much does it cost to register as a sole trader?
• Information you need to register as a sole trader
• How to register as a sole trader
• FAQs on registering as a sole trader

Key takeaways

• Register with HMRC by 5 October after the tax year you started self-employment, as long as you earn more than £1,000 — registration is free and takes around 10 minutes online.
• Prepare your National Insurance number, business start date, and business name before you begin, so you can complete the registration process without delays.
• Recognise that sole trader status comes with personal liability for all business debts, meaning your personal assets are at risk if the business runs into financial trouble.
• Register for VAT if your annual turnover exceeds £90,000, and set up PAYE and employer registration with HMRC if you plan to hire staff.

What is a sole trader?

A sole trader is a self-employed person who owns and runs their business as an individual. You have complete control over all decisions, keep all profits, and bear full responsibility for any losses.

Despite the name, you can hire employees as a sole trader. The "sole" refers to ownership, not workforce size. This makes it different from partnerships or limited companies where ownership is shared.

Sole trader status works well for:

• new businesses testing ideas with a simple structure
• contractors seeking straightforward setup for freelance work
• self-employed professionals wanting minimal admin for service-based work
• growing businesses that may change structure later as they scale

Pros and cons of being a sole trader

Being a sole trader offers several advantages over partnerships and limited companies, making it an appealing business structure for the approximately 1.2 million taxpayers carrying on a trade, according to ICAEW tax news.

Here are the key advantages to consider.

Advantages of being a sole trader

As a sole trader, you can:

• pay minimal startup costs compared to forming a limited company
• skip Companies House registration and avoid complex paperwork
• meet fewer reporting requirements than other business structures
• keep all profits for yourself without sharing with partners or shareholders

However, there are some drawbacks to consider.

Disadvantages of being a sole trader

As a sole trader, you may need to:

• bear personal responsibility for all business debts, putting your personal assets at risk if the business fails
• manage pension contributions for yourself and any employees you hire
• change your business structure if you want to sell equity stakes to investors
• face challenges selling the business, particularly if your services are highly specialised

When do you need to register as a sole trader?

You must register as a sole trader if you earn more than £1,000 from self-employment in any tax year (6 April to 5 April).

Key deadlines to keep in mind:

• registration deadline: 5 October after the tax year you became self-employed
• late registration: fines may apply, though penalties are sometimes waived if tax is paid on time
• scope: all self-employment income, including part-time side businesses

How much does it cost to register as a sole trader?

Registering as a sole trader with HMRC is completely free. You don't need to pay any setup fees to officially start your business.

However, you should budget for other startup costs like insurance, equipment, and any specific licences your industry requires. Keeping your initial costs low is one of the main benefits of choosing this business structure.

Information you need to register as a sole trader

Gather these details before you start the registration process:

• National Insurance number
• business start date
• business name and type of business

How to register as a sole trader

Registering as a sole trader takes about 10 minutes online. Once complete, you'll have legal permission to run your business and pay the correct taxes. Here's the complete process:

1. Choose a business name

You have flexibility in naming your sole trader business.

Business naming options for sole traders:

• use your legal name and trade as "Charlie Cooper" without needing additional registration
• choose a trading name like "Charlie's Coffee Caravan" for customer recognition
• include both names on official documents as "Charlie Cooper trading as (t/a) Charlie's Coffee Caravan"

Naming restrictions:

• avoid using "limited", "Ltd", "LLP", or "plc"
• avoid trademarked names by checking the UK Intellectual Property Office
• avoid offensive or restricted words

2. Register as a sole trader with HMRC

HMRC registration automatically covers two essential requirements:

• self assessment: for paying income tax on your profits
• national insurance: Class 2 and Class 4 contributions if profits exceed £12,570

Note: HMRC has identified a calculation error affecting some taxpayers above this threshold for the 2024-25 tax year and is working to resolve it.

Additional registrations you may need:

• VAT registration: required if annual turnover exceeds £90,000
• employer registration: required if you hire staff

Here's how to complete your registration.

Register for Self Assessment

The simplest way to register as a sole trader is through the HMRC Government Gateway. You'll need a Government Gateway user ID and password to sign in. If you don't have one, you can create an account during the process.

You have two registration options:

• register online through the HMRC Government Gateway
• complete the HMRC form 'Register if you're a self-employed sole trader' and post it to HMRC

You'll need the information listed above for the registration.

Once you've submitted the form, HMRC will send you a 10-digit Unique Taxpayer Reference (UTR) and an activation code for your online account. Use this account to complete your annual Self Assessment income tax return, keeping in mind that Making Tax Digital (MTD) for income tax will apply from April 2026 for those with combined gross income above £50,000.

You'll also need to understand your National Insurance requirements.

National Insurance obligations:

• pay if annual profits exceed £12,570
• contribute to Class 2 and Class 4 National Insurance
• let your Self Assessment return calculate contributions automatically
• pay alongside your income tax with no separate process required

3. Register for VAT

You may need to register for VAT depending on your turnover.

VAT registration requirements:

• register if annual turnover exceeds £90,000 (current or expected)
• register voluntarily below this threshold to reclaim VAT on business expenses
• reclaim VAT when selling to other VAT-registered businesses
• complete registration through HMRC's VAT service using your Government Gateway ID

The £90,000 threshold was raised for the first time since 2017 in the spring 2024 budget.

You can learn more in this detailed guide to value added tax (VAT).

4. Register as an employer

If you plan to hire staff, you'll need to complete additional registrations.

Employer obligations when hiring staff:

• register with HMRC using the employer registration service
• set up Pay As You Earn (PAYE) to collect income tax and National Insurance from employees accurately, since over 730,000 PAYE refunds went unclaimed last year
• enrol eligible employees in a pension scheme and contribute to their pension
• get Employers' Liability insurance to protect against workplace claims

5. Licences and permits

Licences and permits depend on your business type and location. Check with your local council for specific requirements in your area.

Common licence requirements include:

• food hygiene and premises licences for food businesses
• alcohol licences for pubs, bars, and off-licences
• taxi or private hire licences for transport services
• entertainment licences for venues hosting live music or performances

FAQs on registering as a sole trader

Here are answers to common questions about sole trader registration.

When should I register as a sole trader?

You must register by 5 October after the end of the tax year in which you became self-employed. For example, if you started trading in July 2024, you must register by 5 October 2025.

Can I register as a sole trader if I already have a job?

Yes, you can work as a sole trader alongside employment. You'll pay tax and National Insurance on both your employment income and self-employment profits through Self Assessment.

Do I need a business bank account as a sole trader?

You're not legally required to have a separate business bank account, but it's highly recommended. A dedicated business account makes it easier to track income and expenses, manage cash flow, and prepare your tax return.

What happens if I don't register as a sole trader?

If you fail to register by the deadline, HMRC may charge you a penalty. However, they sometimes waive penalties if you pay your tax on time. It's always best to register as soon as you start trading to avoid any issues.

Can I change from sole trader to limited company later?

Yes, you can change your business structure at any time. Many sole traders incorporate as a limited company as their business grows. You'll need to register the company with Companies House and inform HMRC of the change.