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

Going self-employed is refreshingly simple in the UK — there's no company to form and no filing fee to pay. But "simple" isn't the same as "nothing to do." You still have to tell HMRC you exist, and there's a hard deadline for doing it, along with new digital filing rules that landed in 2026. This guide walks through exactly how to register as a sole trader, when you must do it, what you'll pay, and the one deadline it's expensive to miss.

What is a sole trader?

A sole trader is a self-employed person who runs their business as an individual. It's the simplest business structure in the UK: there's no separate legal entity, so you and the business are one and the same for tax and liability purposes. You keep all the profits after tax, but you're also personally responsible for any debts the business runs up.

Freelancers, tradespeople, consultants, online sellers and most people starting a side business begin as sole traders. You can trade under your own name or a business name, and you can take on staff — being a "sole" trader refers to the ownership structure, not to working alone.

Do you need to register as a sole trader?

You must register with HMRC once your gross trading income goes over £1,000 in a tax year (the tax year runs 6 April to 5 April). That £1,000 figure is the trading allowance — earn less than it, and you don't need to register or report the income at all.

The threshold looks at income, not profit, and it applies whether the work is full-time, part-time or a side hustle running alongside a PAYE job. So if you turned over £1,500 from freelance work but only made £400 after costs, you're still over the line and must register. You can technically start trading straight away — registration is a tax formality, not a licence to begin.

When do you have to register by?

The deadline is 5 October following the end of the tax year in which you started trading. Because the tax year ends on 5 April, that gives you six months after year-end to get registered:

Don't leave it to the deadline. Registration isn't instant — HMRC posts out your Unique Taxpayer Reference (UTR) and activation code, which can take a couple of weeks, and you'll need both before you can file. Registering late, or filing without a UTR you never chased, is a common way to end up with an avoidable penalty.

How do you register as a sole trader?

Registering as a sole trader really means registering for Self Assessment as a self-employed person. It's free and done online:

That's the whole process. If any of it feels fiddly, or you'd simply rather it were done correctly and on time, our sole trader accounting service handles registration for you and takes the annual return off your plate too.

What tax and National Insurance do sole traders pay?

As a sole trader you pay Income Tax on your profits and Class 4 National Insurance, both settled through your Self Assessment return. Income Tax uses the standard bands, with your first £12,570 tax-free under the personal allowance:

On top of Income Tax, Class 4 National Insurance is charged at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270. Class 2 National Insurance (£3.65 a week for 2026/27) is no longer compulsory if your profits are above the £6,845 small profits threshold — you're treated as having paid it, so your State Pension record is protected. If your profits are below that, you can pay Class 2 voluntarily to keep your record intact.

Want to see roughly what you'll owe on a given profit? Our sole trader vs limited company calculator runs the Income Tax and National Insurance figures for you.

Does Making Tax Digital affect you?

This is the big change for 2026, and every new sole trader should understand it. Making Tax Digital for Income Tax (MTD for IT) replaces the single annual Self Assessment return with quarterly digital updates filed through HMRC-approved software. It's being phased in by income level:

"Qualifying income" here means your total turnover from self-employment and property before expenses. If you're over £50,000, you're already in — and the first quarterly update, covering 6 April to 5 July 2026, is due by 7 August 2026. Miss submissions and HMRC's new points-based penalty system applies, with a £200 fine once you reach the points threshold. Below £50,000 for now, you carry on with the normal annual return until your band's start date arrives.

Sole trader or limited company: which is better?

Starting as a sole trader is the right call for most people early on — it's simple, cheap and private, with none of the filing obligations that come with a limited company. But as profits grow, a limited company can become more tax-efficient, and it gives you limited liability that a sole trader doesn't have.

There's no universal cut-off; it depends on your profit level, how much you need to draw personally, and your appetite for admin. The quickest way to see where you stand is to compare the two side by side with our limited company vs sole trader calculator, then get advice before you switch — the timing of an incorporation matters.

What records do you need to keep?

From the day you start trading, you must keep records of your business income and expenses — you'll need them to work out your profit and complete your return. In practice that means holding on to:

• All sales invoices and till receipts for money coming in
• Receipts and invoices for expenses — stock, tools, mileage, software, a proportion of home costs
• Bank statements for the account you trade through
• Records of anything you took out of the business for personal use

Keep them for at least five years after the 31 January filing deadline they relate to. If MTD applies to you, those records also need to be kept digitally in compatible software, so it's worth setting up a simple bookkeeping system from the start rather than shoeboxing receipts for a year.

Frequently asked questions

Related: our sole trader accounting service and the limited company vs sole trader calculator. Official guidance is on the gov.uk set up as a sole trader pages.