How to register as a sole trader in the UK

If you’ve decided to go it alone and become your own boss, registering as a sole trader is one of the simplest ways to get started. It’s quick, relatively low-cost, and gives you full control over your business, which is likely why more than half of UK businesses have followed the same route.

The process isn’t complicated, but it’s still important to understand what’s involved, from your legal responsibilities to tax obligations.

This guide will walk you through some of the key things you need to know about registering as a sole trader in the UK. In it we’ll help you weigh up whether becoming a sole trader is right for you. Remember that depending on your personal circumstances, you should also consider seeking expert advice on this topic.

What is a sole trader?

A sole trader is someone who runs their own business as an individual. It’s the most common business structure in the UK. According to the Office for National Statistics, there were 3.1 million sole traders at the start of 2024 – 56% of all private sector businesses.

This sole trader structure is a common choice for business owners that are starting small, working alone or offering freelance or contract services. It’s popular with tradespeople, consultants, creatives and those looking to test out a new business idea without the admin demanded by setting up a limited company.

Sole trader vs limited company: what’s the difference?

While both structures allow you to run your own business, let’s take a look at some of the key differences:

Find out more about the differences on Gov.uk.

It’s easy to see why the sole trader route makes sense early on, but as your business grows, a limited company may offer more protection and credibility. Zempler Bank offers a Company Formation service if and when you're ready to make that switch – but more on that later.

Looking for more info? Take a look at our Sole trader vs limited company guide.

How to register as a sole trader: step-by-step

Becoming a sole trader doesn’t mean you have to set up a formal company, but you do need to let HMRC know you’re self-employed so they can collect the right tax.

Here’s what you need to do:

Step 1: Check that being a sole trader is right for you

Before registering, take a moment to confirm that this company structure suits your needs. If you're looking for more guidance on whether the sole trader structure is right for you, consult your professional advisor. You can also check out our guide on the different types of business ownership  to get you started.

So let's assume you've decided that sole trader is the business type for you… What's next?

Step 2: Register for self-assessment with HMRC

You need to register as a sole trader with HMRC if your self-employed income goes over £1,000 in a tax year – even if it’s a side business or part-time venture. This is an important step so you can report your income and pay tax as a self-employed person.

You can register online via the HMRC website. You’ll need:

• Your National Insurance number
• Personal details like your name, address and contact details
• Business details (if self-employed), including the business name, a brief description of what your business does and the business address

Once you’ve registered, HMRC will send you a Unique Taxpayer Reference (UTR) and set you up for the online self-assessment system. You’ll then need to submit a tax return every year.

Make sure to register by 5th October after the end of the tax year in which you started trading to avoid late penalties.

Step 3: Consider National Insurance contributions

As a sole trader, you’ll usually pay:

• Class 2 National Insurance* – a flat weekly rate if your profits are above a certain threshold (£6,725 a year at the time of writing)
• Class 4 National Insurance – a percentage of your profits over £12,570

HMRC calculates and collects these when you do your self-assessment, so you don’t need to register separately.

*Note: Class 2 National Insurance contributions (NICs) were phased out from April 2024. From then on, self-employed individuals pay contributions solely through Class 4 NICs, with revised thresholds and calculations.

Step 4: Choose a business name (if you want to)

You can trade under your own name or choose a business name. If you go with the latter, make sure:

• It’s not the same as an existing trademark or business name
• It doesn’t include words like “Ltd” or “Limited”
• It isn’t misleading (like implying you're a different type of business)

You don’t need to register the name, but you should check its availability to avoid confusion or legal issues further down the line.

Step 5: Understand your legal responsibilities

As a sole trader, you’re responsible for:

• Keeping accurate records of your income and expenses
• Submitting your self-assessment tax return on time (usually by 31st January)
• Paying the correct amount of tax and National Insurance
• Registering for VAT if your turnover exceeds £90,000 (you can also voluntarily register for VAT if your turnover is less)
• Reporting the exact date your business started (and ceased, if applicable) in your self-assessment return, from April 2025.

While you’re not legally required to use a separate bank account, it’s good practice – especially when it comes to managing income, tracking expenses, and staying on top of tax. 

Zempler Bank offers smart, streamlined accounts built for sole traders — with tools to track income, manage expenses and avoid surprise fees. Find out more about our business bank accounts.

A closer look at self-employment tax

Unsurprisingly, tax can be one of the trickier parts of self-employment – but it doesn’t have to be overwhelming.

Here’s what you’ll typically pay:

• Income tax on your profits above the personal allowance (£12,570 for most people)
• National Insurance (see step 3 above)
• VAT if your business reaches the threshold (or you’re voluntarily choosing to pay VAT)

It’s worth keeping a portion of your income aside throughout the year so you’re not caught off guard when the tax man comes knocking. Smart sole traders set aside 20 to 30% of their income just to be on the safe side.

Zempler Bank’s smart tools – like real-time income tracking and tax insights – can help you stay ahead of your obligations without the usual stress.

For more information, consult your professional tax advisor. You can also take a look at our guide on tax for the self employed.

Is being a sole trader right for you?

If you’re just starting out, becoming a sole trader can offer the perfect balance of freedom and simplicity. But it’s not without its drawbacks. Here are some of the general advantages and disadvantages:

Pros:

• Easy and quick to get started
• Flexibility and full control over decision-making
• Fewer reporting requirements
• Lower setup and accounting costs.

Cons:

• You’re personally liable for debts
• Less separation between personal and business finances
• Fewer tax planning opportunities compared to limited companies
• May be harder to win contracts with large companies.

Depending on your line of work, you might also need business insurance  – like public liability insurance if you interact with customers or the public, or professional indemnity insurance if you offer advice or services.

And if you're unsure whether to operate as a sole trader or limited company, it’s worth speaking to a professional advisor like an accountant or small business adviser. The right structure depends on your individual circumstances, including income, liability risk and future plans.

Ready to go limited? Zempler makes it simple

Thinking ahead and going for a limited company structure instead of a sole trader? Zempler Bank makes it easy to form a limited company and apply for a business account in one go. No juggling different platforms, no chasing paperwork – just a quick, seamless setup built for people who want to focus on growing their business rather than navigating red tape.

Learn more about our Formations service.