Register a Sole Trader in the UK: Costs & Benefits

Looking to start a business in the United Kingdom? Discover the process and benefits to register a sole trader in the UK. Register your business in the UK with the help of our company formation experts today.


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    Are you thinking of starting your own business and wondering how to register as a sole trader in the UK? Since sole traders require little paperwork and are simple to form, many entrepreneurs choose to become sole traders.

    This article will guide you through the process of sole trader registration in the UK, ensuring you have all the information needed to start your entrepreneurial adventure.

    What is a Sole Trader?

    A sole trader is a self-employed individual who runs and owns a firm. You have total control over your company’s decisions when you operate as a lone proprietor, but you are also personally responsible for any debts or losses. Due to its simplicity and convenience of creation, this business structure is well-liked and presents an appealing choice for entrepreneurs wishing to launch their own businesses.

    Benefits of Registering as a Sole Trader in the UK

    • Simple and Quick Setup: Registering as a sole trader in the UK is simple.
    • Complete Control: As the only proprietor, you are free to decide on any business matter without needing to consult others.
    • Tax Advantages: Sole traders benefit from simplified tax reporting and the ability to offset business losses against other income.
    • Privacy: Sole traders are exempt from having to make their financial information publicly available, unlike limited businesses.

    Steps to Set up a Sole Trader in the UK

    Here are the steps for sole trader registration in the UK:

    Step 1: Select a Company Name

    The first step in sole trader registration in the UK is choosing a business name. Make sure your name is original and doesn’t violate any already-registered trademarks. Even if you can trade under your own name, establishing your brand might be aided by choosing a distinctive business name.

    Step 2: Register with HMRC

    To register as a sole trader in the UK, you need to inform HM Revenue and Customs (HMRC) that you are self-employed. This could be completed digitally through the HMRC website. You’ll have to provide information including:

    • Your National Insurance number
    • Your company name
    • The nature of your company
    • Your contact details

    Once enrolled, you’ll acquire a Unique Taxpayer Reference (UTR) number, which you’ll need to file your tax returns.

    Step 3: Establish a Corporate Bank Account

    While not a legal requirement, it’s advisable to set up a separate bank account for your business. This facilitates better money management and makes it easier to track your business expenses.

    Step 4: Understand Your Tax Obligations

    You must maintain precise records of your earnings and expenses as a sole proprietor. This is necessary in order to file your annual self-assessment tax return. You’ll need to pay:

    • Income Tax
    • Class 2 National Insurance if your profits are above a certain threshold
    • Class 4 National Insurance if your profits exceed another threshold

    Additional Considerations

    • Business Insurance: Consider obtaining appropriate insurance to protect yourself and your business. Public liability insurance and professional indemnity insurance are common for sole traders.
    • VAT Registration: If your turnover is more than the VAT threshold, you have to register for VAT. Even when your turnover is less than this amount, you may choose to register voluntarily.

    Expected Costs of Registering as a Sole Trader

    Registering as a sole trader is free. However, there are other costs associated with running your business, such as:

    • Professional indemnity insurance
    • Office supplies and equipment
    • Marketing and advertising
    • Accountancy fees if you hire an accountant

    Taxes Applicable to Sole Traders

    As a sole trader, you will be in charge of paying:

    • Income Tax: This is computed using the profits from your business. 
    • National Insurance Contributions (NICs): You’ll need to pay Class 2 and Class 4 NICs if your profits exceed certain thresholds.
    • VAT (if applicable): You must register for VAT and apply VAT to the goods and services you sell if your company’s turnover surpasses the VAT threshold. 


    Registering as a sole trader in the UK is a straightforward process that offers many advantages for new entrepreneurs. You may easily register your firm and begin trading if you follow the above procedures. Recall to understand your tax responsibilities, maintain correct documents, and, if necessary, seek professional assistance from experts from OnDemand International. With careful planning and management, your sole trader firm can prosper in the cutthroat UK market.


    Yes, if you are self-employed and earning money, you must register as a sole trader with HMRC, even if your earnings are low.

    Yes, you can change your legal form from a sole trader to a limited company or another structure in the future if your business needs to evolve.

    As a sole trader, you need to pay Income Tax on your business profits and Class 2 and Class 4 National Insurance contributions. Your business’s revenue determines the amount you must pay.