How to register as a sole trader

What is a sole trader?
Why become a sole trader?
How to register as a sole trader
Benefits of being a sole trader
When to register as a sole trader
How do I register a sole trader name?
How long does it take to register as a sole trader?
Does it cost to register as a sole trader?
Can I be a sole trader and employed?
What tax does a sole trader pay?
How do I pay tax as sole trader?
Do sole traders pay VAT?
Is sole trading the same process as registering as self-employed?
Sole trader definitions
Frequently asked questions ( FAQ )

What is a sole trader?

A sole trader is a business structure where a self employed person runs their business as a single entity. As a sole trader, you’re both the owner and operator, giving you full control over how the business is run — from day to day decisions to managing finances and taking on any liabilities.

Registering as a sole trader is usually straightforward, but you’ll still need to meet the legal and financial requirements that come with being self employed.

Why become a sole trader?

Becoming a sole trader can be a great option if you’re starting a small enterprise. If you’ve always wanted to run your own business, the simple structure gives you the freedom to pursue your passion while keeping full control over your finances and day to day operations.

As a self employed person, you’re responsible for managing your own taxes and keeping accurate records of your income and expenses. You’re also personally liable for any business debts, as you and your business are considered the same legal entity.

How to register as a sole trader

Follow these steps to register as a sole trader in the UK:

Step 1. Tell HM Revenue and Customs (HMRC) that you're self-employed and need to pay tax as a sole trader. You can do this by logging in to your Government Gateway account, or by creating an account if you don’t already have one, or by post.

Step 2. Complete the HMRC Self-Assessment form. You’ll be asked for some essential details, including your name, sole trader business name (if different from your own name), your address, and the nature of your business.

Step 3. HMRC will send you a Unique Taxpayer Reference (UTR) after you’ve completed and submitted the form.

Step 4. Once you’ve registered, you’ll need to complete a tax return each year through your online account.

Benefits of being a sole trader

Here are six main advantages becoming a sole trader

1. You’re your own boss and make all the decisions.
2. You keep all post tax profits, with no partners or shareholders to divide them with.
3. Setting up is quick, straightforward and low cost, with minimal paperwork.
4. Accounting requirements are simpler than those for limited companies.
5. You don’t need to register with Companies House.
6. It’s easy to change your business structure later if you decide to become a limited company or partnership.

When to register as a sole trader

If you’ve been running your business for a while and earning money from it, you’re considered a sole trader and should register your business.

When you choose to register can depend on your circumstances. For example, you may need proof of self employment to claim certain benefits, or you might want to pay Class 2 National Insurance.

Your earnings also play a role in whether you need to register as a sole trader. You can find out more about when registration becomes necessary in our guide on how to set up as a sole trader.

How do I register a sole trader name?

If you want to operate under a business name rather than your own name, there are a few rules you need to follow.

To register with a sole trader business name, you’ll need to choose a name that’s not already in use. You can use a company name availability checker to make sure.

You can’t add ‘limited’ or ‘LLP’ to the name, and you should avoid using sensitive or misleading words or expressions in the name.

You’ll need to register your trading name with HMRC - either online through the government website or by completing a paper form.

Once registered, you can start trading and managing your finances as a sole trader, under your chosen business name. You’ll need to add your business name and your own name to any official business correspondence.

How long does it take to register as a sole trader?

It can take up to 15 days for HMRC to issue your Unique Taxpayer Reference (UTR), depending on whether you register online or by post.

The initial setup as a sole trader, however, only takes a few hours. If you plan to trade under a business name rather than your own, it’s worth taking some time to choose and check the name before you register.

Does it cost to register as a sole trader?

Registering as a sole trader is free. However, it’s worth thinking about the other costs involved in running a business before you get started.

These may include business insurance, web hosting, professional advice, or any services you need to support your operations.

As a sole trader, you’re responsible for managing your own taxes and National Insurance contributions. Keeping detailed records of your income and expenses will make completing your Self Assessment much easier. You may also want to use an accountant to help you stay organised.

Can I be a sole trader and employed?

You can be both employed and a sole trader at the same time. This is common if you’re starting a business while staying in your current job. As an employee, your employer will continue to deduct tax from your salary through PAYE.

As a sole trader, you’ll also need to complete a Self Assessment tax return and pay tax on any profits your business makes — on top of the tax you pay through your employment.

It’s also wise to let your employer know you’re working as a sole trader to avoid any potential conflicts of interest with your contract.

What tax does a sole trader pay?

There are two main types of tax for sole traders: Income Tax and National Insurance (NI) contributions (Class 2 and Class 4). The amount you pay depends on your trading profits — your total income minus allowable business expenses.

You may have a personal allowance before you start paying Income Tax, and once you pass that threshold the rate depends on your earnings. Tax bands differ in Scotland, so check the Scottish tax rates if you’re based there.

Whether you pay Class 2 or Class 4 NI will depend on your profits, and rates can change, so always check the latest guidance on gov.uk. If your annual turnover exceeds the VAT threshold, you’ll also need to register for VAT.

Understanding your tax responsibilities is essential to running a successful business, and an accountant can help you stay compliant as rules change.

How do I pay tax as a sole trader?

If you’re a sole trader, you’ll still pay tax through Self Assessment — but Making Tax Digital (MTD) is changing how you do it. You’ll need to keep digital records using recognised software and send quarterly updates to HMRC instead of completing everything at once.

To get started, register as self employed with HMRC through the online portal and keep accurate records of your income and expenses throughout the year. You’ll still submit your final return by 31 January as usual.

MTD becomes mandatory from 6 April 2026 for sole traders with turnover above £50,000, so it’s worth preparing early. A business bank account can help you stay organised, track spending and budget for future tax payments.

Many sole traders also ask: do I need a business bank account? While it’s not a legal requirement, separating your personal and business finances can make managing your money much easier. Check whether your bank allows business use of a personal account, as some don’t. And if you already have a business account, switching to one that better suits your needs is usually straightforward.

With the updated MTD rules for Income Tax, sole traders and landlords must use compatible software to keep digital records and send tax information directly to HMRC. These changes are designed to simplify tax management and reduce errors. To learn more about how HSBC UK can support you with MTD compliance, visit Making Tax Digital – Your Guide to Business.

Do sole traders pay VAT?

You must register for VAT as a sole trader if your turnover exceeds the VAT threshold. Please check gov.uk for the latest rates. You can also choose to register voluntarily, even if your turnover is below the threshold.

Some sole traders opt in voluntarily if their clients prefer working with VAT registered businesses. However, being VAT registered means taking on additional admin and record keeping, and you may want an accountant to help you meet your VAT obligations.

The HSBC Small Business Banking Account (SBBA)* can help you stay on top of your cashflow and categorised spending, and makes day to day financial management simpler. For businesses with additional needs — such as multiple directors or shareholders — you can compare HSBC business accounts to find the right fit.

HSBC UK Small Business Banking Account

Apply for an account with us today and gain access to:

• No monthly account fee and free UK digital banking¹
• Business borrowing solutions are also available to suit you²

For eligible startups, small businesses and switchers

Is sole trading the same process as registering as self-employed?

While the terms "sole trading" and "registering as self-employed" are often used interchangeably, they refer to slightlydifferent aspects. Sole trading describes the business structure where you operate as an individual, while registeringas self-employed is the legal process of informing HMRC that you are responsible for paying your own taxes. Both areessential steps for starting your own business.

Sole trader definitions

A sole trader is an individual who owns and runs their own business, taking full responsibility for its operations andfinances. This includes keeping all profits after tax but also being personally liable for any debts the businessincurs. It’s a simple and flexible business structure, ideal for freelancers, contractors, and small business owners.

Frequently asked questions ( FAQ )

How can I register as self employed?

You can register as self employed by informing HMRC through their online portal. This involves creating or logging into your Government Gateway account and completing the Self Assessment registration. You’ll need to provide details such as your name, address and the nature of your business. Once registered, HMRC will send you a Unique Taxpayer Reference (UTR) along with instructions for filing your tax returns.

Do I need to register as a sole trader?

Yes — if you’re running your own business as an individual and not as part of a company, you must register as a sole trader with HMRC. This ensures you’re set up to pay Income Tax and National Insurance through the Self Assessment system. You need to register even if you’re working part time or alongside another job.

What is a sole trader business?

A sole trader business is a simple structure where one individual owns and runs the business. The sole trader is personally responsible for all finances and any business debts, and keeps all profits after tax. It’s a popular choice for freelancers, contractors and small business owners because it’s flexible and straightforward to manage.

How do I register as self employed?

To register as self employed, visit the HMRC website and complete the Self Assessment registration. You’ll provide personal details, your business name (if you have one) and information about the type of work you do. Registering ensures you can correctly pay your taxes and National Insurance contributions.

*Subject to application, eligibility and credit check. T&Cs and fees apply.

Note to PWS team: keep the disclaimers section and the UK SBBA section