Freelancing, side hustles, and small businesses are booming. However, with freedom comes responsibility. If you’re also earning money on your own, even part-time, you might need to register as self-employed sole trader.
In this article we walk you everything you need to know about self employed sole trader, including:
- How do you register with HMRC as a self-employed sole trader
- When must you register as a self-employed sole trader
- Pro and cons to register as self employed sole trader
- What are your responsibilities as a sole trader
- Sole trader vs. self employed
- And much more…
Let’s get into it!
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What is a Sole Trader?
A sole trader is a simple business setup where one person owns and runs everything. There’s no legal difference between you and your business. You have full control, but you’re also responsible for any debts.
You don’t need to set up a company. But you do have to tell HMRC that you’re self-employed.
It’s the simplest way to start working for yourself.
When Must You Register as a Self-employed Sole Trader?
You must register as a sole trader if:
- You earn more than £1,000 in a tax year from self-employment
- You want to pay voluntary Class 2 National Insurance to qualify for benefits
- You need proof of self-employment for things like childcare or mortgage applications
- You work as a subcontractor under the Construction Industry Scheme (CIS)
Even if you’ve registered for Self Assessment before, you must register again as a sole trader when starting a new business.
How Do You Register with HMRC as a Self-Employed Sole Trader?
The simplest and most common method is to register as self employed sole trader online via the Government Gateway. The process is free and relatively quick.
Here’s a step-by-step guide on how to become self employed sole trader:
- Gather Necessary Information: Before you start, you will need the following details:
- Your National Insurance number (NINO)
- Full name and date of birth
- Current home address and contact details
- The date you started self-employment
- A description of the nature of your business/work (e.g., “photographer”, “builder”)
- Your business name (if you’re using one other than your own name)
- Create a Government Gateway Account (if you don’t have one): Visit the GOV.UK website. Create a new account for HMRC’s online services. This will give you a user ID and password.
- Register for Self Assessment: Once logged in to your new or existing account, look for the option to “add a tax, duty or scheme” and choose “Self Assessment”. Follow the prompts to register as a sole trader and complete the online form, providing the information you gathered in step 1.
- Receive Your UTR Number: After submitting the form, HMRC will send you a letter containing your 10-digit Unique Taxpayer Reference (UTR) number and an activation code. The UTR number is essential for all future tax communications and filings, so keep it safe.
- Activate Your Online Account: Use the activation code sent in the post to activate your online account fully.
When’s the Deadline to Register as a Self-Employed Sole Trader?
You must officially register as a self-employed sole trader for Self Assessment by 5 October following the end of the tax year in which you started your business.
Example: If you started working for yourself in May 2025 (within the 2025-26 tax year, which runs from 6 April 2025 to 5 April 2026), you would need to register by October 5, 2026.
Even if you don’t hit the £1,000 allowance but plan to grow or want to claim business expenses, it’s often a good idea to register sooner rather than later.
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What Are Your Responsibilities as a Sole Trader?
Registration is just the start! Once you are running your business, you have a few core responsibilities you need to keep on top of:
Here’s what you need to know based on HMRC’s latest guidance for sole traders.
1. Legal Risks and Liability
As a sole trader, your business has what’s called unlimited liability. That means you’re personally responsible for any debts or legal issues your business faces.
To protect yourself, many people choose to take out business insurance. The right policy can give you some peace of mind if something goes wrong.
2. Choosing a Business Name
As soon as you start working for yourself, you’ll need to choose a business name. You can simply use your own name or come up with something different.
If you go for a trading name, make sure it
- Isn’t already taken or trademarked.
- Doesn’t include “limited” or “Ltd” unless you’ve set up a company.
- Follows basic naming rules for UK businesses.
3. Keeping Records and Accounts
You need to keep track of all your business income and expenses. These records will help you calculate your profit or loss when completing your Self Assessment tax return.
It’s a good idea to keep:
- Invoices and receipts for everything you buy or sell
- Bank statements
- Mileage logs (if you use your vehicle for business)
- Any other documents that show business costs or earnings
Keeping accurate records protects you if HMRC ever asks to review your figures.
4. Registering as a Sole Trader
You can start trading straight away, even before registering. However, once your self-employed income goes over £1,000 in a tax year (6 April to 5 April), you must register for Self Assessment as a sole trader.
You can also register earlier if you prefer. Many people do this to stay organised or access certain benefits.
After registering, you’ll need to submit a Self Assessment tax return every year, declaring your income and expenses.
5. Taxes
When you submit your Self Assessment return, HMRC will work out how much Income Tax and National Insurance you owe based on your profits.
You must register for VAT if your taxable turnover reaches the threshold (currently £90,000 for 2025/26). You can also choose to register voluntarily before hitting that amount if you want to reclaim VAT on your business expenses.
Depending on what you do, you may need to register for other types of tax too. For example, if you import or export goods, employ staff, or sell certain products. It’s worth checking what taxes may apply to your specific trade.
Also, don’t forget to explore tax reliefs for sole traders, as they can reduce your overall tax bill.
6. Rules for Your Type of Business
Your responsibilities can vary depending on your line of work. Some businesses need licences or permits, such as if you:
- Sell food or alcohol
- Trade in the street
- Play recorded music publicly
You may also need to consider business insurance, even if it’s not legally required, to protect yourself and your clients.
If you sell online, buy or sell goods abroad, or handle personal data, you’ll need to comply with specific rules (for example, data protection laws or import/export regulations).
7. Where You Work
If you run your business from home, check whether you need permission from your landlord or mortgage provider. You may also have to pay business rates on part of your property, although small businesses often qualify for a discount or even exemption.
If you rent or buy separate premises, you’ll almost certainly need to register for business rates.
Remember to claim expenses for things like your home office, property costs, or equipment. They can reduce your taxable profit.
8. Taking On People to Help
If you decide to employ staff, new responsibilities come into play. You’ll need to:
- Run payroll and report employees’ pay to HMRC
- Pay employer’s National Insurance, though you may qualify for an allowance to reduce your bill
- Provide a workplace pension for eligible employees
If you bring in freelancers or agency workers, you’re responsible for their health and safety while they work for you.
Pros and Cons of Registering as a Self-Employed Sole Trader
Being a sole trader has plenty of benefits, but some drawbacks too. Let’s lay them out so you can decide whether it’s right for you.
Pros of Registering as a Self-Employed Sole Trader
- Easy to set up
- Full control over your business
- Keep all profits
- Fewer admin tasks than a limited company
Cons of Registering as a Self-Employed Sole Trader
- You’re personally liable for debts
- Less credibility than a limited company
- Harder to raise investment
Is a Sole Trader Self-Employed?
Yes, a sole trader is a type of self-employed individual who owns and runs their own business. But the term “self-employed” is broader.
- “Self-employed” describes the status of working for oneself rather than an employer. And paying taxes through Self Assessment.
- “Sole trader” describes the legal and operational structure of a one-person business with no legal distinction between the owner and the business.
All sole traders are self employed. But not all self employed people are sole traders.
The easiest way to think of it is this: Once you decide to work for yourself and pay your own tax, you are self-employed. If you choose to run that business completely on your own, without forming a company or having a partner, you are specifically a Sole Trader.
Do I Need to Register as a Sole Trader if I’m Self-Employed?
Yes, if you are self-employed and operating as a sole trader you must register with HMRC. The phrases “sole trader” and “self-employed” often overlap. But just being self employed doesn’t always automatically mean you’re registered and compliant.
If you’re wondering if I need to register as a sole trader if I am self-employed, the answer is: yes if you meet the criteria (trading for profit, earning over the threshold, or needing to prove self-employed status).
Should I Register as a Sole Trader or Self Employed?
For a starting entrepreneur, they are not really two different choices, but rather a distinction in terminology.
- Self-Employed is your general tax status (it means you work for yourself).
- Sole Trader is the specific legal structure you choose (it means you are the single, sole owner of your self-employed business).
When you register with HMRC, you register for Self Assessment as a Self-Employed Sole Trader. You don’t choose one over the other.
The real choice is between a Sole Trader (simple, unlimited liability) and a Limited Company (more complex, limited liability). Start as a Sole Trader unless you expect high profits or high risk.
Can a Company Register as a Self Employed Sole Trader?
No. Sole trader status is for individuals. If you’re setting up a company, that’s a different process. You’d register a limited company with Companies House.
Can an Employee Register as a Self Employed Sole Trader?
Yes, if you’re doing freelance or side work outside your employment. Just make sure you’re not breaching your employment contract.
Working with an Accountant for Sole Traders
Even though the process to register as a sole trader is straightforward, many sole traders find real value in working with an accountant. Here’s why:
- An accountant can help you register correctly (and avoid missing deadlines like the 5 October rule or 31 January submission) so you don’t incur penalties.
- They can help you plan for tax, identify allowable expenses you might miss, and structure your business so you pay no more tax than necessary.
- They’ll keep you aware of changes in tax law and regulation.
- If you ever decide to grow, take on employees, or switch to a limited company structure, an accountant will guide you.
Are you looking for professional tech-savvy tax advisors and accountants in the UK to guide you? Contact us now!
The Bottom Line
The bottom line is that getting registered as a self-employed sole trader is an achievable first step that opens the door to your entrepreneurial future. Just remember those key deadlines and keep those receipts!
WE CAN HELP
At Accotax, we have a team of chartered accountants specialise in sole traders and self-employed clients. Our Qualified Accountants will collect the required information and will submit an application to HMRC on your behalf. You just need to fill out this registration form.
Disclaimer: All the information provided in this article on What Are “How To Register As Self Employed Sole Trader?” including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.