Set up as a sole trader

Overview

Sole traders must register with HM Revenue and Customs (HMRC) and follow certain rules on running and naming their business.

If you’re a sole trader, you run your own business as an individual and are self-employed.

You can take on staff - being a sole trader means you’re responsible for the business, not that you have to work alone.

Your responsibilities

You’re responsible for:

keeping records of your business’s sales and expenses
sending a Self Assessment tax return every year
paying Income Tax on your profits and Class 2 and Class 4 National Insurance - use HMRC’s calculator to help you budget for this
your business debts
bills for anything you buy for your business
registering for VAT if your turnover reaches the VAT threshold
registering with the Construction Industry Scheme (CIS) if you’re a contractor or sub-contractor in the construction industry

Naming your business

You can use your own name or trade under a business name - read the rules for naming your business.

You must include your own name and business name (if you have one) on any official paperwork, like invoices and letters.

Register

Register as soon as you can after starting your business. At the latest, you should register by 5 October in your business’s second tax year.

Example
If you start working as a sole trader between April 2014 to March 2015, you should register before 5 October 2015.

If you register later than this, you won’t get a penalty as long as you send your Self Assessment tax return and pay your bill on time.

How to register

This depends on your circumstances.

New sole trader who’s not sent tax returns before

Tell HM Revenue and Customs (HMRC) you want to be a sole trader by registering as a new business. You’ll register for Self Assessment tax returns and Class 2 National Insurance at the same time.

You’ll then be able to report your self-employment income through a tax return after the end of each tax year.

New sole trader who’s sent tax returns before

You may have sent Self Assessment tax returns before as an individual, eg for rental or investment income.

You now need to register as self-employed and for Class 2 National Insurance using form CWF1. You can keep your existing Self Assessment account.

You need your 10-digit Unique Taxpayer Reference (UTR) from when you registered for Self Assessment, so HMRC can link your accounts.

You can find your UTR on previous tax returns, your online account or other documents from HMRC. If you can’t find it, call the Self Assessment helpline.

Former sole trader who wants to start up again

You need to reregister using form CWF1. You’ll need your UTR for the same reasons as new sole traders already in Self Assessment.

How long it takes

Allow 10 working days to complete the registration process because HMRC needs to post you an activation code. You’ll be prompted for this when you first log in to your online account (also known as a Government Gateway account).

Allow 21 days if you’re abroad.

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