To register as self-employed in the UK, you register for Self Assessment as a sole trader with HMRC. That single online registration also records you for Class 2 National Insurance. You must register if your self-employment income is more than £1,000 in a tax year (6 April to 5 April). The deadline is 5 October after the end of the tax year in which you started. You can start trading straight away and register afterwards, but registering early is better: it gets you a tax reference and lets you budget for a bill that is payable in one lump. This guide covers what counts as self-employment, how to register, and the tax that follows.
Are you actually self-employed?
Registration only matters if you are trading. HMRC says you are likely to be trading if you sell regularly to make a profit, make items to sell, earn commission selling goods for others, or are paid for a service you provide. Occasionally selling your own unwanted possessions is not usually trading, although HMRC asks occasional sellers to check whether they need to report the income. Indicators of running a business rather than being an employee include having several customers at once, deciding how, where and when you work, providing your own main equipment, and being able to hire help at your own expense. Our guide to the badges of trade explains how borderline cases are decided.
You can be employed and self-employed at the same time, for example with a day job and a business in the evenings. Your salary stays under PAYE, and the business profit goes on your tax return.
The £1,000 trading allowance
Every individual has a £1,000 trading allowance. If your gross trading income (turnover, not profit) for the tax year is £1,000 or less, you generally do not need to tell HMRC. Above that, you must register, and you then choose between deducting your actual expenses and deducting the flat £1,000 allowance. The allowance suits low-cost activities such as tutoring or occasional freelance work. Actual expenses suit almost any business with real costs. You cannot do both for the same trade.
There are reasons to register even below £1,000. HMRC lists proving you are self-employed (for example to claim Tax-Free Childcare), paying voluntary Class 2 National Insurance to protect your State Pension record, and registering as a subcontractor under the Construction Industry Scheme.
How to register, step by step
- Have your National Insurance number ready. You cannot register without one; HMRC has a separate process if you need to apply;
- Use HMRC's online registration ("check how to register for Self Assessment") and choose the sole trader route;
- Register again if you are already in Self Assessment. If you already file returns for another reason, such as rental income, you still need to register the self-employment. HMRC says this is needed so you are registered for Class 2 National Insurance;
- Wait for your UTR. HMRC sends a 10-digit Unique Taxpayer Reference. You need it to file and pay, and to sign up for Making Tax Digital if that applies to you;
- Set up your records. HMRC is explicit that you must keep records from the day you start trading. That means income, expenses, and the receipts behind them.
For the 2025/26 tax year the notification deadline was 5 October 2026. If you started trading before 6 April 2026 and have not registered, do it now. Our guide to registering for Self Assessment explains the late-registration rules and why paying by 31 January matters more than the registration date.
Choosing a business name is optional. You can trade under your own name. If you choose a trading name, it must not include "limited", "Ltd", "LLP", "plc" or similar, and your own name must still appear on invoices and letters. As a sole trader you have unlimited liability for the business's debts.
What you will pay in 2026/27
Self-employed profits are taxed through Self Assessment, with income tax and National Insurance worked out together on your return:
| Item | 2026/27 (England, Wales, NI) |
|---|---|
| Personal allowance | £12,570 |
| Basic rate income tax | 20% on taxable income £12,571–£50,270 |
| Higher rate income tax | 40% on £50,271–£125,140 |
| Additional rate income tax | 45% over £125,140 |
| Class 4 National Insurance | 6% on profits £12,570–£50,270; 2% above |
| Class 2 National Insurance | Treated as paid if profits are £7,105 or more; voluntary rate £3.65 a week below that |
Scottish taxpayers use different income tax bands. The Class 2 position is worth understanding. Where profits are at or above the small profits threshold of £7,105, Class 2 contributions are treated as paid, so your National Insurance record is protected without any payment. Below it, paying voluntarily at £3.65 a week is a low-cost way to keep the year counting.
The bill for a tax year is due by 31 January after it ends. Once you are established, HMRC also asks for payments on account towards the following year on 31 January and 31 July. In the first year of trading this can mean paying the first year's tax plus half as much again in one January. That surprise is the main reason to set money aside from your first invoice.
VAT and Making Tax Digital
Two thresholds matter as the business grows:
- VAT. You must register if your taxable turnover for the last 12 months goes over £90,000, or if you expect it to exceed £90,000 in the next 30 days alone. The test is rolling, not tax-year based, so check it monthly. You can register voluntarily below the threshold to reclaim VAT on costs;
- Making Tax Digital for Income Tax. Sole traders and landlords must keep digital records and send quarterly updates once their qualifying income exceeds the threshold. That was more than £50,000 (based on 2024/25) from 6 April 2026. It is more than £30,000 (based on 2025/26) from 6 April 2027, and more than £20,000 (based on 2026/27) from 6 April 2028. Qualifying income is self-employment and property income before expenses, not profit. See our guide to MTD for sole traders.
Sole trader or limited company?
HMRC describes the sole trader as the simplest business structure to set up and keep records for. There is no company to run, and you keep all the profit after tax. The trade-offs are unlimited liability and the fact that all profit is taxed as your income in the year it arises, whether you draw it or not. A limited company changes both, but brings corporation tax, director duties and dividend tax. The comparison only becomes worth running once profits are comfortably into the higher-rate band, or when liability risk is significant.
Acumon's accountants for sole traders handle registration, bookkeeping set-up, VAT and MTD readiness. Our Self Assessment service covers the annual return and payments on account.