How to Register as a Sole Trader in the UK: A Complete Guide

How do I register as a sole trader with HMRC?

Step-by-step registration process

Registering as a sole trader is relatively straightforward. Here’s the process:

1. Decide your start date — the day you officially begin trading.

2. Create a Government Gateway account on HMRC’s website.

3. Register for Self Assessment as a sole trader.

4. Keep your login details safe — you’ll use these every year for your tax return.

I often remind clients: don’t overcomplicate this. HMRC doesn’t need a full business plan, just the basics of who you are and what you’re doing.

Information you’ll need to provide

When registering, HMRC will ask for:

• Your full name and address.

• Date of birth and National Insurance number.

• The nature of your business (a simple description, e.g. “freelance graphic designer”).

• Your start date as self-employed.

Tip from experience: use an email address you’ll always have access to. I’ve had clients lose years of tax history because they registered with a work email that later got deleted!

Deadlines for registration

You must register by 5 October in your business’s second tax year. For example, if you started trading in June 2024, you must register by 5 October 2025.

Miss this, and HMRC may issue penalties.

When do I need to tell HMRC I’m self-employed?

The £1,000 trading allowance

Not every hobby or side hustle needs registering straight away. If you earn less than £1,000 per tax year (before expenses), you can use the trading allowance and don’t need to register.

For example, if you made £700 selling furniture on Vinted in a year — no registration required.

Key registration deadlines

If you go over £1,000, you must register by 5 October in your second tax year. Keep this date in mind — it sneaks up quickly.

Penalties for late registration

Late registration can mean penalties and unnecessary stress. I once worked with a client who delayed registering for two years — HMRC caught up, and the late filing fines piled up to nearly £1,000. Avoid this by getting set up early.

Can I be both employed and a sole trader?

How tax works if you’re employed and self-employed

Yes, you can. Many people have a job and run a small business on the side. Your employer will deduct tax through PAYE for your salary, but you’ll still need to complete a Self Assessment for your sole trader income.

Declaring both income sources

On your Self Assessment, you’ll declare:

• Your salary (from your P60 or payslips).

• Your business income and expenses.

HMRC then calculates the combined tax owed.

National Insurance considerations

Being both employed and self-employed can mean paying two types of National Insurance:

• Class 1 through your employer.

• Class 2 and 4 on your self-employed profits.

It sounds messy, but software (or an accountant!) can make it painless.

Can I change from a sole trader to a limited company later?

How to switch to a limited company

Switching is common. To incorporate, you’ll:

1. Register your new company with Companies House.

2. Inform HMRC that you’re ceasing as a sole trader.

3. Open a business bank account in the company’s name.

Tax implications of changing structure

Limited companies pay Corporation Tax instead of Income Tax on profits. This can be more tax-efficient at higher earnings, but dividends and salary drawdowns need planning.

I often tell clients: the “best” structure depends on profit levels, personal income, and growth plans.

When it makes sense to switch

If you’re earning £30k+ consistently, or want to reinvest profits into your business, it’s worth considering incorporation. It also makes sense if you’re seeking investment, or want the protection of limited liability.

Can a sole trader employ staff?

Registering as an employer

Yes, sole traders can employ staff. You’ll need to register with HMRC as an employer and get set up for PAYE.

Payroll and PAYE responsibilities

Once registered, you’ll need to:

• Run payroll.

• Deduct Income Tax and National Insurance from staff wages.

• Report to HMRC in real time.

Many sole traders outsource payroll to keep things simple — a wise choice in my view.

Employer’s National Insurance and pensions

You’ll also be responsible for:

• Employer’s National Insurance contributions.

• Enrolling eligible staff into a workplace pension.

This adds admin, but it also helps your business grow. I’ve seen many clients flourish after hiring their first employee — it’s often the turning point where a “side hustle” becomes a real business.

Final thoughts

Becoming a sole trader is one of the simplest ways to start a business in the UK. Registration is straightforward, but deadlines, taxes, and compliance matter.

Start small, stay organised, and get advice early — especially if you think you’ll switch to a limited company in the future.

At Cannon Accountants, we’ve helped hundreds of sole traders register, manage their taxes, and grow into thriving businesses. If you’d like tailored advice, get in touch — it’s often quicker and less stressful than trying to piece it all together yourself!

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