How to set up a sole trader in the UK

Liability: You are personally responsible for all business debts, so your own assets are at risk.

Minimum capital: None

1. 1

   Check a sole trader business is right for you

   You and the business are legally one person, so you are personally liable for all its debts ('unlimited liability'). A limited company or LLP can protect personal assets if you expect big contracts, borrowing or investors.

2. 2

   Choose your business name

   Trade under your own name or a business name. It must not include 'limited', 'Ltd', 'LLP' or 'plc', be offensive or be too similar to a trade mark; sensitive words need permission. Show your name and business name on invoices and letters.

3. 3

   Gather your details

   You need your National Insurance number, name, address and date of birth, your business start date and a short description of what you do.

4. 4

   Register for Self Assessment as a sole trader

   Register with HMRC online. You must register if you earn over £1,000 in a tax year (6 April to 5 April). Tell HMRC by 5 October after the end of the tax year you started, for example by 5 October 2026 for work started in 2025-26.

5. 5

   Get your UTR and activate your account

   HMRC sends your 10-digit Unique Taxpayer Reference (UTR) and an activation code by post. Use them to activate your online Self Assessment account. Registering late can bring a penalty.

6. 6

   Open a separate business bank account

   Not a legal requirement for sole traders, but it keeps business and personal money apart and makes your records and tax return much easier.

7. 7

   Keep business records from day one

   Record income and expenses so you can work out profit or loss for your tax return. HMRC can ask to see your records.

8. 8

   Check licences, insurance and other registrations

   Depending on your trade you may need licences or permits and business insurance. Register as an employer if you take staff on, and for VAT if taxable turnover passes £90,000 (voluntary below that).

9. 9

   Plan for tax

   HMRC works out Income Tax and National Insurance from your Self Assessment return, so set money aside. Check whether Making Tax Digital for Income Tax applies (qualifying income over £50,000 from 6 April 2026).

• National Insurance number
• Name, address, date of birth and contact details
• Business start date and a description of your trade
• Business name, if you use one (it does not need registering)
• HMRC online account sign-in (you can create one during registration)
• Any licences, permits or insurance your trade requires (varies)

• Keep records of all business income and expenses and set tax money aside through the year.
• Complete a Self Assessment tax return every year once registered (tax year 6 April to 5 April).
• Register for VAT when taxable turnover goes over £90,000 in 12 months, or you expect it to in the next 30 days; you can register voluntarily below that.
• Register as an employer with HMRC before your first payday if you take on staff (you cannot register more than 2 months before you start paying people).
• Making Tax Digital for Income Tax is mandatory from 6 April 2026 if qualifying income is over £50,000 (over £30,000 from April 2027, over £20,000 from April 2028): use compatible software for quarterly updates.
• Open a business bank account and arrange any insurance or licences your trade needs.
• Consider incorporating (Ltd) later if profits or risk grow.

• Self Assessment return: file online by 31 January after the tax year ends (31 January 2027 for 2025-26); a paper return is due by 31 October (31 October 2026).
• Pay your Self Assessment bill by 31 January; if you make payments on account, a second payment is due by 31 July.
• If Making Tax Digital for Income Tax applies to you, send quarterly updates and a final declaration through compatible software.
• VAT returns (usually quarterly) if VAT-registered, and PAYE reporting each payday if you employ staff.