To register as a sole trader, you sign up for Self Assessment with HMRC by 5 October following the end of the tax year you started trading. You apply online via your Government Gateway account, receive a Unique Taxpayer Reference (UTR) within ten working days, and file your first Self Assessment return by 31 January following the tax year end. Class 4 NI is paid alongside income tax via Self Assessment, and you must register for VAT separately if turnover exceeds £90,000.
This guide covers when and how to register, the tax and NI you will pay, other registrations to consider, the records you must keep, and when to think about going limited.
When to register
You must register with HMRC for Self Assessment by 5 October following the end of the tax year in which you started trading.
The UK tax year runs 6 April to 5 April. If you started trading on 1 June 2025 (in tax year 2025/26 ending 5 April 2026), you have until 5 October 2026 to register.
Earlier registration is allowed and often easier — you set up your account before there is a tax return to file. Late registration can attract a penalty if it leads to a failure to notify HMRC of liability.
You can register before you start trading too. If you intend to start within the current tax year, sign up early and the system handles the timing automatically.
Step-by-step registration
The online process:
- Gather your details. National Insurance number, date of birth, address, contact details, business name (can be your own name or a trading name), nature of business, start date.
- Set up a Government Gateway account (or use your existing personal tax account). Go to gov.uk/register-for-self-assessment.
- Apply for Self Assessment. Complete form CWF1 (the self-employment registration form) online. The form gathers your details and sets you up as self-employed for Self Assessment.
- Wait for your UTR. HMRC issues a 10-digit Unique Taxpayer Reference, sent by post within ten working days. The UTR is your permanent reference for all Self Assessment dealings.
- Activate your online account. When the UTR arrives, log back in to add Self Assessment to your Government Gateway services. You will need an activation code which arrives separately by post.
Once activated, you can file Self Assessment returns online from your account.
Tax and NI you will pay
Three tax obligations apply to most sole traders.
Income tax via Self Assessment
You pay income tax on your trading profits, after allowable expenses. The 2026/27 bands (subject to confirmation in any relevant Budget):
- Personal allowance: £12,570 (tapered above £100,000)
- Basic rate (20%): £12,570 to £50,270
- Higher rate (40%): £50,270 to £125,140
- Additional rate (45%): above £125,140
Income tax is paid via Self Assessment by 31 January following the tax year end, with a payment on account system that means you pay 50% of the next year’s expected liability on 31 January and again on 31 July.
Class 2 and Class 4 National Insurance
Class 2 NI was abolished from 6 April 2024 for most self-employed people. You no longer have to pay it as a flat weekly amount. If your profits are below the Small Profits Threshold, you can voluntarily record a Class 2 entry on your Self Assessment return to maintain a qualifying year for State Pension.
Class 4 NI applies on profits above a lower limit, at 6% on profits up to a higher limit and 2% on profits above (current 2026/27 rates — verify before quoting).
Class 4 NI is collected through Self Assessment alongside income tax.
VAT
If your VAT-able turnover exceeds the registration threshold (£90,000 — verify this remains correct for the current period), you must register for VAT and start charging VAT on your supplies. You can also register voluntarily below the threshold, which can be advantageous for B2B businesses that want to recover input VAT.
Other registrations to consider
Several other registrations may apply depending on your business:
- PAYE — if you employ anyone (even a spouse or family member paid above the £5,000 threshold). Register up to four weeks before the first payday.
- CIS (Construction Industry Scheme) — for contractors and subcontractors in construction. Mandatory for relevant trades.
- Trade-specific licences — food businesses (food hygiene), childminding (Ofsted), private hire (local authority), and many regulated trades.
- Data protection registration — most businesses processing personal data must register with the ICO.
- MTD ITSA — Making Tax Digital for Income Tax Self Assessment is rolling out from April 2026 in phases. Check whether your turnover puts you in scope for the relevant tax year.
For a fuller picture of how sole-trader status compares to running through a limited company, compare limited company vs sole trader.
Records you must keep
HMRC requires you to keep:
- Records of all income (sales invoices, till receipts, payments received)
- Records of all expenses (purchase invoices, receipts, mileage logs)
- Bank statements for the business (separate business banking is strongly recommended even though not strictly required)
- VAT records if registered
Records must be kept for at least five years after the 31 January submission deadline of the relevant tax year. So records for tax year 2025/26 must be kept until at least 31 January 2032.
Making Tax Digital for ITSA changes the record-keeping rules from April 2026 in phased rollout. Affected sole traders must keep records digitally and submit quarterly updates through MTD-compatible software.
When to consider going limited
Switching to a limited company makes financial sense at certain profit levels. Generally:
- Profit below £30,000: sole trader is usually simpler and cheaper
- Profit £30,000 to £50,000: the calculation is closer; admin saving favours sole trader, tax saving favours limited
- Profit above £50,000: limited company often beats sole trader on combined Corporation Tax + dividend tax, but admin cost is higher
Other reasons to incorporate include limited liability protection, perception of larger procurement clients, and access to pension contributions through an employer route.
Key takeaways
- Register for Self Assessment by 5 October following the end of the tax year you start trading
- HMRC issues a UTR within ten working days
- Pay income tax and Class 4 NI through Self Assessment by 31 January
- Register for VAT separately if turnover exceeds £90,000
- Keep records for at least five years from the 31 January submission deadline
- MTD ITSA phases in from April 2026 — check your scope
- Consider going limited above approximately £50,000 profit
Frequently asked questions
When do I need to register as a sole trader? By 5 October following the end of the tax year in which you started trading. The UK tax year runs 6 April to 5 April. Registering earlier is allowed and often easier.
Do I still pay Class 2 National Insurance as a sole trader? Class 2 NI was abolished from 6 April 2024 for most self-employed people. If your profits are below the Small Profits Threshold and you want to maintain State Pension entitlement, you can voluntarily record Class 2 contributions on your Self Assessment return.
When do I register for VAT? When your VAT-able turnover exceeds the registration threshold (£90,000 — verify the current figure). Voluntary registration below the threshold is also allowed and can be advantageous for B2B businesses.
How long must I keep my records? At least five years from the 31 January submission deadline of the relevant tax year. So for the 2025/26 tax year (submission deadline 31 January 2027), keep records until at least 31 January 2032.
Should I form a limited company instead of being a sole trader? Generally only if your profit exceeds approximately £30,000 to £50,000, or if you need limited liability protection. Below £30,000 the simpler sole-trader regime usually wins on combined tax and admin.
(Verify Class 4 NI rates and the VAT registration threshold before quoting specific figures, as both can change at Budget.)
Useful resources
GOV.UK — Register for Self Assessment https://www.gov.uk/register-for-self-assessment
GOV.UK — Set up as self-employed https://www.gov.uk/set-up-self-employed
GOV.UK — Making Tax Digital for Income Tax https://www.gov.uk/guidance/check-if-youre-eligible-for-making-tax-digital-for-income-tax