How to register as a sole trader in the UK

Sole traders pay income tax and National Insurance Contributions. These will be calculated when you complete your self assessment, but you can also use an online calculator.

Sole traders don’t need a business bank account, but it’s best practice to open one to simplify tax calculations.

Many people switch from a sole trader to a limited company when their business becomes more established and complex or when their profits increase.

Some sole traders hire an accountant, while others prefer to handle their finances on their own.

Sole traders can hire employees. If they do so, they will have the same responsibilities as other employers.

You will receive your UTR when you register for self-employment with HMRC.

Sole traders have unlimited liability, pay income tax on profits, and have fewer administrative tasks. Limited companies have limited liability, pay corporation tax and dividend tax, and have more complex administration.

You must register as a sole trader before 5 October of the tax year after you started trading.

No qualifications are needed to become a sole trader, but your area of business may have specific requirements.

Most businesses can use a sole trader structure, but there may be requirements for regulated industries like the finance sector.

Sole traders risk losing their personal assets when faced with debt or legal action.

Most sole traders receive payments through bank transfer or card payments. You can create invoices manually with a tool like Microsoft Office, or use dedicated software.

As a sole trader, there is no separation between personal and business finances or assets.

This depends on your business activity. For instance, food businesses need food hygiene certificates, while taxi drivers need licenses.

No. While limited companies register with Companies House, sole traders register with HMRC.

Yes, sole traders must complete a Self Assessment tax return every year by 31 January.