Registering as a sole trader: tax, deadlines and what to set aside

What a sole trader is

A sole trader runs their own business as an individual. You keep the profits after tax, and you're personally responsible for the business's debts. It's the simplest way to start, and it's how most one-person rounds work. A limited company is a separate legal entity with its own rules, and it's worth asking an accountant about once the profits are larger.

When to tell HMRC

You must register for Self Assessment by 5 October after the end of the tax year in which you started trading. If you started in the 2026-27 tax year (which runs from 6 April 2026 to 5 April 2027), you'd register by 5 October 2027.

There's an exception: if your total trading income is £1,000 or less in a year, the trading allowance can mean you don't need to register. Once you earn more than that, register. Don't wait until the deadline, because registering takes a few weeks and you'll want to be sure it's done in good time.

The dates that matter

How much tax will you pay?

You pay income tax and National Insurance on your profit: your income minus allowable expenses. For 2026-27 in England, Wales and Northern Ireland:

• The first £12,570 of income is covered by the personal allowance, so there's no income tax on it
• Income tax is 20% on profit above that, up to £50,270
• Class 4 National Insurance is 6% on profits between £12,570 and £50,270, and 2% above that
• Class 2 National Insurance: if your profits are £7,105 or more, it's treated as paid and you don't need to do anything

Scotland has different income tax rates and bands.

The first-year surprise: payments on account

If your tax bill is over £1,000, HMRC asks you to pay in advance towards next year's bill, in two equal instalments on 31 January and 31 July. The catch is the first time: on 31 January you pay the balance for the year just ended and the first instalment for the next year. It can feel like a double bill, and it's the reason many new traders get caught out. Plan for it from your first month.

Cash basis: when you record income

Most small traders now use the cash basis by default. You record income when you receive it and expenses when you pay them. It's simpler than accruals accounting, and it matches how a round works: you've done the work, then you're paid.

Keep your records

Keep records of every payment in and out. HMRC expects you to keep them for at least five years after the 31 January deadline for that tax year. A business bank account isn't a legal requirement for a sole trader, but keeping business money separate makes the records much easier to follow.

Things people forget

• Business names: if you trade under a name that isn't your own, you may need to show your own name and an address on invoices and letters. Check the GOV.UK rules on business names
• Data protection: if you hold customers' names and addresses, you may need to pay the ICO's data protection fee. The ICO has a short self-assessment on its website
• Insurance: see insurance for round trades
• Making Tax Digital: if your income is high enough you'll soon need to keep digital records and send quarterly updates. See Making Tax Digital for sole traders

This isn't tax advice

These are the general rules for most sole traders in 2026-27. An accountant can tell you what applies to you, and a few hundred pounds a year for good advice often saves more than it costs.