Tell HMRC you exist
If you started working for yourself at any point in a tax year, you must register with HMRC by 5 October of the following tax year. So if you went self-employed in July 2025, you must register by 5 October 2026. Register through gov.uk using the CWF1 form, or sign into your Government Gateway account and add Self Assessment to it.
HMRC posts you a Unique Taxpayer Reference (UTR), a ten-digit code. Keep it safe. You will need it every time you file.
What you will pay
Income tax at the normal personal rates on your profit (what you earn minus allowable expenses), after the £12,570 Personal Allowance.
National Insurance comes in two flavours for sole traders:
- Class 2, a flat weekly amount of £3.45. Payable through Self Assessment if your profits are £6,725 or more.
- Class 4, 6% on profits between £12,570 and £50,270, then 2% on anything above.
VAT is a separate conversation
You only register for VAT if your taxable turnover is over £90,000 in any rolling 12-month period, or if you expect to pass that in the next 30 days. We cover VAT registration in its own guide.
What to keep
HMRC can look back five years. Keep everything for at least that long:
- Every invoice you raise, and every receipt you spend.
- Business bank statements.
- A mileage log if you drive for work.
- A note of personal use for anything used partly for work: phone, car, home office.
The one tip that will save you hours later
Open a separate bank account for your business. For a sole trader it is not legally required, but at year-end it saves hours of reconciliation, and it makes HMRC's definition of an allowable business expense much easier to prove.
How much to set aside
A reasonable rule for someone earning £30,000 to £50,000 is to park 25% to 30% of what you take in. The exact figure depends on your allowable expenses, but underestimating is where new sole traders get caught out. The 31 January tax bill arrives whether you have saved for it or not.