Going self-employed as a tradesperson is one of the best moves you can make — more control over your work, higher earnings potential, and no one telling you what to do. But the paperwork side puts a lot of people off. It doesn’t need to.
Setting up as a sole trader is free, takes about ten minutes online, and the ongoing admin is manageable once you know what’s involved. This guide walks through the whole process, from registering with HMRC to getting your first customers.
Key Takeaways
- Registering as a sole trader is free — you do it via HMRC’s Self Assessment service, not Companies House
- You must register by 5 October of the second tax year you’re self-employed, but sooner is better
- You’ll pay income tax and Class 4 National Insurance on your profits above the personal allowance
- Public liability insurance is essential before you take any jobs — most policies start from around £80–£200/year
- Keep records of all income and expenses — receipts, invoices, mileage, materials — everything reduces your tax bill
- A professional website and Google Business Profile make a big difference to how many enquiries you get in those first months
What Does Being a Sole Trader Actually Mean?
A sole trader is the simplest legal structure for running a business. You and the business are the same legal entity — you keep all the profits, and you’re personally responsible for any debts. There’s no limited company, no directors, no shareholders.
For most tradespeople starting out, it’s the right choice. Less admin, no Companies House filings, and you can always convert to a limited company later if your turnover warrants it.
| Structure | Cost to Set Up | Liability | Admin Level |
|---|---|---|---|
| Sole trader | Free | Personal (unlimited) | Low — annual Self Assessment |
| Limited company | £12 via Companies House | Limited to company assets | Higher — accounts + payroll |
| Partnership | Free | Shared personally | Low to medium |
Most tradespeople start as sole traders. A limited company starts to make sense when you’re consistently earning above £40,000–£50,000 profit, as the tax efficiency starts to outweigh the extra admin.
Step 1: Register With HMRC
You register as a sole trader by registering for Self Assessment at gov.uk. This is how HMRC finds out you’re self-employed and expects a tax return from you.
How to do it:
- Go to gov.uk and search “register for Self Assessment”
- Create a Government Gateway account (or log in if you have one)
- Complete the online form — it asks for your name, address, date of birth, National Insurance number, and the date you started trading
- HMRC sends you a Unique Taxpayer Reference (UTR) number by post within 10 working days
That’s it. No fee. No solicitor required.
Deadline: You must register by 5 October in the second tax year of trading. The UK tax year runs 6 April to 5 April. So if you started trading in August 2025, you must register by 5 October 2026. But registering straight away is better — it avoids a last-minute rush and penalties.
Trading allowance: HMRC allows you to earn up to £1,000 per tax year from self-employment without registering. Go above that and you’re required to register.
Penalty for late registration: HMRC can charge up to £100 for missing the registration deadline, plus interest on any late tax.
Step 2: Understand Your Tax and National Insurance
Once registered, you’ll file a Self Assessment tax return each January covering the previous tax year. Here’s what you’ll pay on your profits (income minus allowable expenses):
| Tax / NI | Rate | Threshold (2024/25) |
|---|---|---|
| Income tax | 0% | Up to £12,570 (personal allowance) |
| Income tax | 20% | £12,571 – £50,270 |
| Income tax | 40% | £50,271 – £125,140 |
| Class 4 NI | 6% | £12,570 – £50,270 |
| Class 4 NI | 2% | Above £50,270 |
A quick example: if you make £30,000 profit, you’d pay roughly:
- Income tax: 20% on £17,430 (profit minus personal allowance) = £3,486
- Class 4 NI: 6% on £17,430 = £1,046
- Total: approximately £4,532
Payments on account: Once your tax bill exceeds £1,000, HMRC makes you pay in advance — half in January, half in July. First-year tradespeople often get a surprise bill covering both the previous year and the first payment on account. Set money aside from the start.
According to GOV.UK, the online Self Assessment deadline is 31 January each year (30 October for paper returns). Missing it costs £100 immediately, plus more if you delay further.
Set aside at least 25–30% of everything you earn. Put it in a separate savings account so it’s not tempting.
Step 3: Get the Right Insurance
This is non-negotiable. Get insured before you take your first paid job.
Public liability insurance (PLI): Covers you if you accidentally damage a customer’s property or injure someone while working. Without it, you’re personally liable for any claims. Most tradespeople start with £1 million or £2 million cover — some customers (housing associations, councils, larger contractors) require £5 million. PLI typically costs £80–£200 per year for a sole-trader tradesperson, depending on trade and turnover.
Employer’s liability insurance: Only required if you hire employees or labour-only subcontractors. If it’s just you, you don’t need it yet.
Van insurance: Standard personal vehicle insurance won’t cover a van used for business. You need commercial vehicle insurance with business use included. For a full guide, see Van Insurance for Tradespeople. Expect £800–£1,500/year depending on your record and trade.
Tool insurance: Your tools aren’t covered by home insurance once they’re in a van or on a job site. Dedicated tool cover costs £10–£30/month and covers theft, loss, and accidental damage.
For a full breakdown of PLI costs and cover, see: Public Liability Insurance for Tradespeople.
Step 4: Keep Proper Records
HMRC requires you to keep records of all business income and expenses for at least 5 years after the relevant Self Assessment deadline. In practice, that means keeping receipts, invoices, and bank statements.
What counts as a business expense (reducing your tax bill):
- Materials and equipment purchased for jobs
- Van running costs (fuel, servicing, MOT, insurance)
- Tools and workwear
- Trade subscriptions and professional memberships
- Phone and broadband used for business
- Marketing costs (website, advertising)
- Training and courses
- Accountant or bookkeeper fees
Mileage: If you use a personal vehicle for work, you can claim 45p per mile for the first 10,000 miles each tax year (25p above that), according to HMRC’s approved mileage rates. Keep a simple mileage log.
Simple bookkeeping options:
- Spreadsheet (free, works fine at the start)
- FreeAgent, QuickBooks, or Xero (£10–£15/month — connects to your bank, generates invoices, prepares tax summaries)
Many tradespeople spend around 2–3 hours per month on admin once they have a simple system. The alternative is a scramble every January trying to reconstruct a year’s worth of receipts.
Step 5: Sort Your Business Name and Bank Account
Business name: You can trade under your own name (e.g., “John Smith Plumbing”) or register a trading name. As a sole trader, you don’t need to register your business name anywhere — just start using it. Avoid names that could be confused with existing businesses or suggest you’re a limited company (“Ltd”).
Business bank account: You’re not legally required to have a separate business account as a sole trader, but it makes bookkeeping significantly easier. Mixing personal and business transactions creates confusion at tax time.
Good options for tradespeople include Starling Business, Monzo Business, and Tide — all free to open, app-based, and designed for self-employed people. High street banks (HSBC, Lloyds, Barclays) offer business accounts too, though they often charge monthly fees.
Step 6: Get Found by Customers
You can be the best plumber, electrician, or roofer in your area — but if customers can’t find you, you won’t get the work.
Google Business Profile: Set this up first. It’s free, and it’s how you appear in Google Maps results when someone searches “plumber near me” or “electrician [your town]”. Add photos, list your services, and collect reviews. According to research by BrightLocal, 87% of consumers used Google to evaluate local businesses in 2023. This is where tradespeople get found.
A professional website: A website gives you somewhere to send potential customers, show your work, and appear in Google’s regular search results. You don’t need anything complicated — five pages covering your services, coverage area, a few photos, and a contact form is enough to start. It tells customers you’re a real, established business rather than someone who took up the trade last week.
For tradespeople building their business from scratch, managed website services like Digital Tradies start from £49/month with no upfront cost — you get a professional site, hosting, and ongoing support built for trade businesses.
**Word of mouth: It still works, especially in the early months. Tell everyone you know you’ve gone self-employed. Ask satisfied customers for Google reviews. For a step-by-step guide, see How to Get More Google Reviews as a Tradesman. One five-star review from a genuine customer is worth more than any advert.
Frequently Asked Questions
Do I need to register with Companies House as a sole trader? No. Companies House is only for limited companies and LLPs. As a sole trader, you register with HMRC for Self Assessment — that’s it. Companies House registration isn’t required and doesn’t apply.
Can I set up as a sole trader while still employed? Yes. There’s no rule against having a job and being self-employed at the same time. You’ll still need to register for Self Assessment and declare both sources of income on your tax return. Your employer continues deducting PAYE tax as normal on your employment income.
What’s the difference between sole trader and self-employed? They mean the same thing. “Self-employed” describes your employment status — you work for yourself rather than an employer. “Sole trader” is the legal business structure. All sole traders are self-employed, but some self-employed people operate through a limited company instead.
Do I need an accountant? Not legally, but it’s worth the cost. A good accountant costs £200–£600/year for sole trader tax returns and can typically save you more than that in legitimate deductions you’d otherwise miss. Many tradespeople use an accountant for their annual return while handling day-to-day bookkeeping themselves.
How soon can I start working after registering? Immediately. Registration is retrospective — you can register after you’ve already started trading (within the deadline). You don’t need to wait for HMRC confirmation. Get insured, get registered, and start working.
Making It Official
Setting up as a sole trader is genuinely straightforward. Register with HMRC, get insured, open a business bank account, and keep your receipts. The first year is the steepest learning curve — after that, it becomes routine.
The tradespeople who build successful businesses quickly do one more thing: make it easy for customers to find them. A Google Business Profile and a professional website put you ahead of most of the competition. If you’re starting from scratch and want a site built and live fast, Digital Tradies builds websites for tradespeople from £49/month — no upfront cost, live in 3 days.
