How to Register as a Sole Trader UK: Step-by-Step Guide

Last updated: 10 October 2026 · For the 2026/27 tax year. General information, not personal tax or financial advice. I’m not a financial adviser.

Checked against GOV.UK and HMRC guidance on 10 October 2026.

If your side hustle has grown past the £1,000 trading allowance, you’ll need to know how to register as a sole trader in the UK, which really means registering with HMRC for Self Assessment. The good news is that it’s much less scary than it sounds, and it’s completely free.

I’m Dr Kalpana Govindaraasan, a scientist and former secondary science teacher, and a mum who likes things explained step by step. In this guide I’ll walk you through when your selling becomes “trading”, the 5 October deadline, how to get your UTR number, the trading allowance vs claiming expenses, National Insurance for 2026/27, payments on account, Making Tax Digital and the records you need to keep. If you’re still working out whether you’re over the limit at all, start with my side hustle tax and £1,000 trading allowance guide.

1. Casual selling or trading? How HMRC decides

Clearing out the loft and selling your old coat on Vinted is not usually a business. GOV.UK says you’re unlikely to pay tax if you sell personal items from your home. Buying things to sell on, making products, or being paid for a service is different. That’s trading, and trading income is taxable once it’s over the allowance.

HMRC uses nine “badges of trade” to decide. No single badge settles it. HMRC looks at the overall picture:

1. Profit-seeking motive: are you aiming to make a profit?
2. Number of transactions: repeated, regular sales point to trading.
3. Nature of the asset: is it something you’d only buy to sell, rather than use or enjoy?
4. Similar trading interests: is it linked to a trade you already do?
5. Changes to the asset: did you repair, upcycle or improve it to sell for more?
6. How the sale was carried out: were you selling the way a shop would?
7. Source of finance: did you borrow to buy stock?
8. Time between buying and selling: quick resales suggest trading.
9. How you got the item: gifts and inheritances are less likely to be trading.

The digital platform reporting rules

Since 1 January 2024, online platforms such as selling apps and marketplaces have had to collect information about sellers and report it to HMRC. The first reports went to HMRC by 31 January 2025. For sales of goods, the reporting exclusion normally applies if you make fewer than 30 sales in a calendar year and receive no more than €2,000. This is a reporting rule, not the UK trading allowance.

This is not a new tax. GOV.UK is clear that a platform reporting you “does not automatically mean you owe tax”. It just means HMRC can see the numbers, so it’s worth getting your own records straight. I go into this in more detail in Vinted tax UK explained, and if you’re just starting out, see how to sell on Vinted.

2. When you must register as a sole trader

You can start trading straight away without registering. But GOV.UK says you must register for Self Assessment as a sole trader if you earn more than £1,000 in a tax year. That £1,000 is your gross trading income (before costs), and it covers all your trading side hustles added together. So £600 from transcription work plus £500 from mystery shopping is £1,100, which is over the limit.

The 5 October deadline

You must tell HMRC by 5 October after the end of the tax year in which you started trading (or first went over £1,000). The tax year runs from 6 April to 5 April. So:

If you’ve just missed the 5 October 2026 date, don’t panic and don’t wait. Register as soon as you can. GOV.UK says that if you register after 5 October 2026, HMRC will write to you with your return deadline, which will be 31 January 2027 or three months from the date of the letter, whichever is later.

You can also register earlier, which I think is sensible if your side hustle is clearly growing. Doing it early means you get your UTR in plenty of time.

3. How to register as a sole trader UK: step by step

Here’s the whole process. It’s free to do it yourself, so be wary of any website that charges you just to register.

Step 1: Get your details ready

You’ll need your National Insurance number (GOV.UK says you need one to register), your name, address, date of birth, phone number, the date you started trading, a short description of what you do, and your business name and address if they’re different. Have it all in front of you, because GOV.UK warns you cannot save a partly completed form.

Step 2: Sign in to HMRC

Go to the “Register for Self Assessment” page on GOV.UK and choose the option for being self-employed (for example, a sole trader). You’ll be asked to sign in. If you don’t already have sign-in details for your HMRC online account, you can create them the first time you sign in, and you may need to prove your identity.

If you’re already registered for Self Assessment for another reason (rental income, for example), you still need to register again as a sole trader. GOV.UK says this is what makes you eligible for Class 2 National Insurance.

Step 3: Fill in the registration

Answer the questions about you and your business, check everything and submit. Keep the submission confirmation and wait for HMRC to process your registration. Your UTR and HMRC correspondence confirm the next steps.

Step 4: Can’t register online? Use form CWF1, not SA1

You may see form SA1 mentioned online. Be careful: GOV.UK says SA1 is for people who need to register but are not self-employed (for example, landlords or people with Capital Gains Tax to pay). If you’re a sole trader and can’t register online, use form CWF1, which registers you for Self Assessment and Class 2 National Insurance. You post it to: Self Assessment, HM Revenue and Customs, BX9 1AN.

Step 5: Get your sole trader UTR number

Your UTR (Unique Taxpayer Reference) is a 10-digit number that identifies you for Self Assessment. GOV.UK says you’ll usually get it by post within 15 working days (21 days if you’re abroad), and it can take longer at busy times. You can get it sooner through the HMRC app. Afterwards, you’ll find it in your HMRC online account, the HMRC app and on HMRC letters.

Keep your UTR safe. You’ll need it to file your tax return, and some platforms or clients may ask for it too.

4. Choose your business name

As a sole trader you can trade under your own name or choose a business name. GOV.UK sets a few rules. Your business name cannot:

• include “limited”, “Ltd”, “limited liability partnership”, “LLP”, “public limited company” or “plc”
• be offensive
• be too similar to another company’s trade mark (you may have to change it if someone complains)

You must show your own name, and your business name if you have one, on official paperwork such as invoices and letters. Before you get attached to a name, it’s worth a quick search to check nobody else is using it.

5. Trading allowance vs claiming actual expenses

This is the part that confuses lots of people, so let me explain trading allowance vs self employment expenses simply. Once you’re over £1,000, you have two choices for working out your taxable profit, and you can’t do both in the same tax year for the same income:

1. Deduct the £1,000 trading allowance from your gross income (HMRC calls this partial relief). If you do this, GOV.UK says you cannot deduct any other expenses.
2. Deduct your actual allowable expenses, such as stock, materials, postage and platform fees.

Example (an illustration): you take £3,000 in a tax year.

• If your real costs were £400, the allowance is better: £3,000 minus £1,000 gives a taxable profit of £2,000 (versus £2,600 using expenses).
• If your real costs were £1,500, claiming expenses is better: £3,000 minus £1,500 gives a taxable profit of £1,500.

The rule of thumb: if your genuine expenses are more than £1,000, claim expenses. If they’re less, the allowance usually wins. Note that you can’t use the trading allowance for income from your employer, your spouse’s or civil partner’s employer, or a company or partnership you (or someone connected to you) control. My side hustle tax calculator lets you compare both quickly.

6. National Insurance for sole traders in 2026/27

As a sole trader you pay Income Tax and National Insurance through Self Assessment, based on your profits.

Class 2 National Insurance (changed from April 2024)

From 6 April 2024, self-employed people no longer have to pay Class 2. Instead:

• If your profits are £7,105 or more (2026/27), Class 2 is treated as paid. You pay nothing, but you still get the year towards your State Pension.
• If your profits are under £7,105, you don’t have to pay anything, but you can choose to pay voluntary Class 2 at £3.65 a week (2026/27). That’s far cheaper than voluntary Class 3, which is £18.40 a week.

If your side hustle is your main work and you have no job or other credits, a small voluntary Class 2 payment could protect your State Pension record. Read my guide to National Insurance gaps before deciding, and check your record in your HMRC online account.

Class 4 National Insurance

Class 4 is worked out on your self-employed profits only, not your salary. So a side hustle making a few thousand pounds’ profit usually pays no Class 4 at all.

A worked example (an illustration)

Say you earn £30,000 from a job, which uses up your £12,570 Personal Allowance, and your side hustle makes £8,000 profit in 2026/27 (England, Wales or Northern Ireland rates):

• Income Tax: £8,000 at 20% = £1,600
• Class 4 NI: £0 (profits are under £12,570)
• Class 2 NI: treated as paid, because profits are over £7,105

Want your own figures? Try my self-employed tax calculator.

7. Payments on account: the surprise first bill

This catches out a lot of new sole traders. Payments on account are advance payments towards next year’s tax bill. Each one is usually half of last year’s Self Assessment bill, and they can include Class 4 NI. They’re due on 31 January and 31 July.

You don’t have to make them if your last Self Assessment bill was under £1,000, or if more than 80% of your tax was already paid at source (for example, through your PAYE tax code).

In my example above, the £1,600 bill is over £1,000 and less than 80% of your total tax was paid through PAYE (about £3,486 of £5,086), so payments on account would apply. The first January bill would be £1,600 for the year just gone plus a first payment on account of £800, so £2,400, with another £800 due on 31 July. Putting aside a share of every payment you receive makes this far less painful.

8. Self Assessment deadlines to put in your diary

9. Making Tax Digital for Income Tax

Making Tax Digital (MTD) for Income Tax means keeping digital records, sending HMRC quarterly updates and filing your return through compatible software. It’s being phased in based on your qualifying income, which is your gross self-employment and property income before expenses (your job’s wages don’t count):

HMRC looks at your tax return and writes to you if you’re over the threshold. Most small side hustles are below £20,000, but if yours is growing fast, it’s worth keeping digital records from the start.

10. Keep good records (and for how long)

GOV.UK says that when you start trading you must keep records. Keep:

• all sales and income (platform statements, invoices, payments in)
• all business expenses (receipts for stock, materials, postage, fees)
• records of your personal income
• VAT or payroll records if those ever apply to you

You must keep them for at least 5 years after the 31 January deadline for that tax year. So records for 2026/27 (filed by 31 January 2028) should be kept until at least 31 January 2033. A simple spreadsheet and a folder of photographed receipts is enough for most side hustles.

11. Do sole traders need a business bank account?

GOV.UK’s record-keeping guidance says you may be able to use either a personal or a business account for your business, but you should check with your bank which type of account you can use for business transactions. It doesn’t say sole traders must have one. Some banks’ personal account terms don’t allow business use, so it’s worth reading yours.

Even if you don’t need one, keeping your side hustle money separate (even in a second personal account, if your bank allows it) makes record keeping and your tax return much easier. I’m not going to recommend a particular bank, so compare the fees and terms yourself.

12. Penalties for registering or filing late

Late registration (failure to notify)

If you register late or don’t register when you should, you may get a penalty. HMRC’s factsheet says this is a percentage of the tax you owe because of the delay: up to 30% if it wasn’t deliberate, 70% if deliberate, and 100% if deliberate and concealed. It can be reduced to 0% if it wasn’t deliberate and you tell HMRC yourself within 12 months. If you had a reasonable excuse, there may be no penalty at all.

Late filing and payment

• Return up to 3 months late: £100 fixed penalty
• After 3 months: £10 a day, up to £900
• After 6 months and again after 12 months: 5% of the tax due or £300, whichever is greater
• Late payment: 5% of unpaid tax at 30 days, 6 months and 12 months, plus interest

The £100 penalty applies even if you owe no tax, so file on time.

How to register as a sole trader UK: FAQs

Do I need to register as a sole trader if I earn under £1,000?

Usually not. If your gross trading income is £1,000 or less, the trading allowance covers it and you don’t normally need to tell HMRC, but you should still keep records. You can choose to register, for example to pay voluntary Class 2 NI.

Is it free to register as a sole trader?

Yes. Registering with HMRC for Self Assessment is free on GOV.UK.

How long does it take to get a UTR number?

GOV.UK says you’ll usually get it by post within 15 working days (21 days if you’re abroad), and it can take longer at busy times. The HMRC app may get it to you sooner.

Can I be employed and a sole trader at the same time?

Yes. Lots of people have a job and a side hustle. Your employer keeps taking tax through PAYE, and you report your side hustle profit on your Self Assessment return.

Can I claim the trading allowance and expenses?

No. For the same income you choose one: deduct the £1,000 trading allowance or deduct your actual allowable expenses.

How to register as a sole trader UK: summary

• Selling your own unwanted things usually isn’t trading. Buying to resell, making products or selling a service usually is.
• Over £1,000 gross trading income in a tax year? Register for Self Assessment by 5 October after that tax year ends.
• Register free on GOV.UK. Use form CWF1 if you can’t go online (SA1 is for people who aren’t self-employed).
• Your 10-digit UTR usually arrives by post within 15 working days.
• Choose the £1,000 trading allowance or your actual expenses, never both.
• 2026/27: Class 2 treated as paid from £7,105 profit (voluntary £3.65 a week below it); Class 4 is 6% from £12,570.
• File online and pay by 31 January, and watch out for payments on account.
• Keep records for at least 5 years after the 31 January deadline.

If you’d like a calmer start to your finances, grab my free 7-Day Financial Reset Kit. And you’ll find more ideas in my side hustles section.

If your situation is complicated (several businesses, income from abroad, or you think you owe tax from earlier years), contact HMRC or speak to a qualified tax adviser or accountant. MoneyHelper has free, impartial guidance on money and self-employment too.

Sources and useful links

• GOV.UK: Become a sole trader
• GOV.UK: Register for Self Assessment
• GOV.UK: Find your UTR number
• GOV.UK: Register for Self Assessment if you are not self-employed (SA1)
• HMRC manual: Badges of trade
• GOV.UK: Selling goods or services on a digital platform
• GOV.UK: Tax-free allowances on property and trading income
• GOV.UK: Choose your business name
• GOV.UK: Self-employed National Insurance rates
• GOV.UK: Voluntary National Insurance
• GOV.UK: Payments on account
• GOV.UK: Self Assessment deadlines
• GOV.UK: Self Assessment penalties
• HMRC: Penalties for failure to notify (CC/FS11)
• GOV.UK: Making Tax Digital for Income Tax
• GOV.UK: Business records if you’re self-employed

This is general information, not personal tax or financial advice. I’m not a financial adviser. Rates and thresholds are for the 2026/27 tax year, were checked on GOV.UK on 10 October 2026, and can change. Scotland has different Income Tax rates.

Planning a home purchase as your business grows? My first-time buyer mortgage checklist explains the income documents lenders may ask self-employed applicants to provide.

About the author: Dr Kalpana Govindaraasan is a UK mum, former secondary science teacher and PhD scientist. MoneySavvyUK shares practical money ideas and general information, with sources so readers can check the rules.