Going self-employed is one of the most accessible routes into
business in the UK. There is no Companies House filing, no share
capital, no directors’ duties — you simply need to register with HMRC
and begin trading. The catch is that most people who fall foul of the
rules do so not because the process is hard, but because the deadline is
counter-intuitive: you do not register before you start, you register
after your first trading year ends.
This guide covers every step you need to take to register as a sole
trader with HMRC in 2026 — what you need before you start, the six-step
online process, what happens once your UTR arrives, and the tax
obligations that apply in the 2026–27 tax year.
A sole trader is an individual who runs a business in their own name.
You and the business are legally the same entity: there is no separation
between personal and business finances for liability purposes. You keep
all profits after tax, but you are personally liable for all business
debts.
Sole trader is the most common business structure in the UK — around
3.1 million businesses operated as sole traders as of 2025. It is the
default starting point for freelancers, tradespeople, consultants, and
anyone taking their first steps in self-employment.
HMRC requires you to register by 5 October following the end
of the tax year in which you started trading. The UK tax year
runs from 6 April to 5 April the following year.
Example: if you started trading on 1 June 2026 —
within tax year 2026–27 — your registration deadline is 5
October 2027.
If your total self-employment income is £1,000 or less in a tax year,
you may be covered by the trading
allowance and may not need to register or file a Self Assessment
return. Once your income exceeds £1,000, registration is mandatory.
Missing the 5 October deadline can result in a penalty. The amount
depends on how late you register and how much tax was owed — see HMRC’s
guidance on Self Assessment penalties for current figures. If you
are already past the deadline, register voluntarily as soon as possible:
unprompted late registration typically attracts a lower penalty than
registration following an HMRC enquiry.
Have the following to hand before you start the online
registration:
The entire registration process is carried out online through
Government Gateway. It takes around 10–15 minutes once you have
everything above to hand.
Go to HMRC’s
online services sign-in page. If you already have a Government
Gateway ID — for example from a previous Self Assessment, Child Benefit
claim, or PAYE reference — use those credentials. If not, select
Create sign-in details and follow the on-screen
prompts. You will need to verify your identity using your National
Insurance number and a form of photographic ID or bank details.
Once signed in, go to your HMRC online account and select
Self Assessment, then Register for Self
Assessment. Alternatively, navigate directly to gov.uk/register-for-self-assessment
and follow the link for registering as self-employed. You will
be directed to the CWF1 online form (or SA1 if you are not registering
as self-employed for the first time).
The registration form will ask why you need to register for Self
Assessment. Select “I am self-employed”. You will then
be prompted to enter your trading start date and a brief description of
your trade or profession — for example, “freelance copywriter”,
“plumber”, or “online retail”. Keep the description accurate: HMRC may
use it to assess whether you are genuinely self-employed rather than
employed.
From 6 April 2024, Class 2 National Insurance was
abolished. In 2026–27, sole traders pay only Class 4
NI on their profits, calculated automatically through Self
Assessment. There is no separate NI enrolment step at registration:
confirming your self-employed status in Step 3 is sufficient to trigger
Class 4 NI obligations.
After submitting the form, HMRC will post your Unique
Taxpayer Reference (UTR) — a 10-digit number — to the address
registered on your Government Gateway account. This typically arrives
within 10 working days, though Royal Mail delays
occasionally extend this. Keep the letter safe: your UTR is required on
every Self Assessment return and in all written correspondence with
HMRC.
When your UTR letter arrives, sign back into your Government Gateway
account. HMRC may send a second letter containing an activation code
(separate from the UTR letter itself). Enter this code to fully activate
your Self Assessment account. Once activated, you can file returns, make
payments, and manage your tax position through your Personal Tax
Account.
Once registered, three recurring dates govern your sole trader tax
life:
A note on payments on account: many new sole traders
are caught off guard in year two. HMRC will ask you to pay 50% of your
estimated current-year bill in January and another 50% in July, on top
of settling any balance from the prior year. Budget for this from the
day you register — setting aside 25–30% of every payment you receive is
a reliable starting point.
The figures below are for the 2026–27 tax year (6
April 2026 – 5 April 2027). Your specific situation may vary — speak to
a qualified accountant.
| Band | Taxable income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 – £50,270 | 20% |
| Higher rate | £50,271 – £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The Personal Allowance is currently frozen at £12,570 until 2027–28.
Source: HMRC — Income
Tax rates and Personal Allowances
As a self-employed person in 2026–27 you pay Class 4 NI on your
annual profits:
Source: HMRC —
National Insurance rates for self-employed
If your taxable turnover exceeds £90,000 in any
rolling 12-month period, you must register for VAT. Registration is
handled through HMRC’s VAT
online services. You may also register voluntarily below the
threshold — useful if your clients are themselves VAT-registered
businesses, as it allows you to reclaim input VAT.
From April 2026, sole traders and landlords with annual
income above £50,000 from self-employment or property must use
MTD-compatible software and submit quarterly digital updates to HMRC,
replacing the single annual return. The mandated threshold drops to
£30,000 from April 2027. If you are already above
£50,000, you must be using compliant software now. See HMRC’s
MTD ITSA guidance for the full requirements.
Operating as a sole trader is simple and low-cost to set up, but it
is not always the most tax-efficient structure as your income grows. A
limited company separates your personal and business finances, offers
liability protection, and can reduce your overall tax bill at higher
income levels — primarily by combining a salary with dividends, which
are taxed at lower rates than sole trader income.
The decision depends on your income level, risk appetite, growth
plans, and how you want to extract profits. For a detailed breakdown
with a side-by-side tax comparison and take-home pay figures, see our
guide to sole trader vs
limited company (coming soon).
HMRC requires sole traders to keep business records for at least
five years after the 31 January Self Assessment
deadline for the relevant tax year. As a minimum, you must record all
income received, all business expenses claimed, and all bank
transactions.
If your income exceeds £50,000, MTD ITSA already requires quarterly
digital submissions — adopting accounting software now, rather than
waiting, will save considerable effort and reduce the risk of errors.
Our complete guide to sole
trader bookkeeping covers software options, allowable expenses, and
record-keeping templates (coming soon).
Do I need to tell HMRC I’m a sole trader? Yes. HMRC
does not automatically know you have started trading. You must register
for Self Assessment by 5 October following the end of your first trading
tax year. Failure to do so may result in a penalty, even if no tax is
owed.
How long does sole trader registration take? The
online registration itself takes 10–15 minutes. HMRC then posts your UTR
within approximately 10 working days. Budget two to three weeks from
submitting the form to having a fully activated Self Assessment
account.
Can I be employed and a sole trader at the same
time? Yes — this is very common. Your employer deducts Income
Tax and National Insurance on your employed income through PAYE. Your
self-employment income is reported separately via Self Assessment, where
any additional Income Tax and Class 4 NI due are calculated on top of
your PAYE deductions.
What is the deadline to register as a sole trader? 5
October following the end of the tax year in which you first started
trading. The UK tax year runs from 6 April to 5 April. If you began
trading at any point during 2026–27 (6 April 2026 to 5 April 2027), your
registration deadline is 5 October 2027.
What is a UTR number and when do I get one? A Unique
Taxpayer Reference (UTR) is a 10-digit number that HMRC assigns to your
Self Assessment record. You need it to file tax returns, set up a
payment plan, and correspond with HMRC about your tax affairs. It is
posted to your registered address within approximately 10 working days
of HMRC processing your registration.
What records must I keep as a sole trader? You must
keep all records of income, business expenses, bank statements, and any
VAT records for at least five years after the 31 January filing deadline
for the relevant tax year. For 2026–27, this means retaining records
until at least 31 January 2033. Inadequate record-keeping can result in
a penalty of up to £3,000. See HMRC’s guidance on
keeping business records for the complete requirements.
Registering as a sole trader is the first step. Filing accurately,
claiming allowable expenses, planning for payments on account, and
staying ahead of MTD ITSA all require ongoing attention — and the cost
of getting it wrong tends to be higher than the cost of getting it right
first time.
AccTek’s sole trader accountancy service covers the full year: Self
Assessment filing, expense review, tax planning, and a named
ICAEW-regulated accountant who knows your numbers. Speak to a sole trader accountant — your first
consultation is free.
Last reviewed: July 2026. All tax figures and thresholds are for
the 2026–27 tax year and are correct at the time of publication. Tax
legislation changes frequently — always verify against current HMRC
guidance or consult a qualified accountant. Your specific situation
may vary. AccTek Ltd is regulated by the Institute of Chartered
Accountants in England and Wales (ICAEW).
Godwin Pinto ACA is a chartered accountant and founder of AccTek with 20+ years of experience accounting and tax for contractors, startup and SME .
AccTek is a member firm of the Institute of Certified Practising Accountants (ICPA). Our accountants have a wide range of qualifications and accreditations from trusted professional bodies such as the AAT, ICPA, and ACCA.
