Quick Summary
- Register with HMRC by 5 October after the end of the tax year you started.
- If your self-employed income is £1,000 or less, the trading allowance usually means you don't need to register.
- You'll get a Unique Taxpayer Reference (UTR) by post — you need it to file.
- You pay income tax and Class 4 National Insurance on profits above £12,570.
- Your first tax bill can include payments on account, so start saving early.
Starting out on your own — as a tradesperson, driver, cleaner, freelancer or consultant — is exciting. The tax side is simpler than many people fear, as long as you register on time and keep good records from day one. Here's how it works in Scotland.
Do I need to register?
You must register for Self-Assessment as a sole trader if your income from self-employment is more than £1,000 in a tax year (6 April to 5 April). Below that, the trading allowance usually covers it and you don't need to register. You may still choose to register — for example to make voluntary Class 2 National Insurance contributions for your State Pension.
When to register
The deadline is 5 October after the end of the tax year in which you started. If you started trading in August 2026 (the 2026/27 tax year), you must register by 5 October 2027. Registering late can lead to a penalty if tax ends up being paid late, so it's best to register as soon as you start.
How to register, step by step
- Create or sign in to your HMRC online account (Government Gateway).
- Register for Self-Assessment as a sole trader, giving your start date, business address and the type of work you do.
- Wait for your UTR — a 10-digit Unique Taxpayer Reference — which arrives by post, usually within a couple of weeks.
- Activate your online Self-Assessment account using the code HMRC sends you.
You don't need to register a company or pay a fee to be a sole trader. You can trade under your own name or a business name, as long as it isn't misleading.
What tax will I pay?
- Income tax on your profit (income minus allowable expenses) above the £12,570 personal allowance. In Scotland, rates start at 19% and rise through 20%, 21% and higher bands.
- Class 4 National Insurance at 6% on profits between £12,570 and £50,270, and 2% above.
- Class 2 National Insurance is no longer compulsory. If your profits are above the small profits threshold you get State Pension credits automatically; if they're below it you can pay voluntarily.
Your first tax bill (and why it's bigger than expected)
Your first return and payment are due by 31 January after the tax year ends. If your bill is £1,000 or more, HMRC may also ask for payments on account — two advance payments towards next year, each half of this year's bill. That means your first January payment can be up to 150% of your tax for the year. Read payments on account explained and set aside around 20–25% of your profit from the start.
Records to keep from day one
- Every sale or invoice, and how you were paid
- Receipts for every business cost
- A mileage log if you use your own vehicle for work
- Bank statements — a separate account for the business makes this much easier
Keep records for at least 5 years after the 31 January filing deadline. If your turnover goes over £50,000 (falling to £30,000 from April 2027), you'll also need Making Tax Digital software and quarterly updates.
Other things to sort out
- Insurance — public liability is essential for most trades
- Licences — for example taxi, food hygiene or waste carrier registration
- VAT — only needed once turnover goes over £90,000; see our VAT threshold guide
- CIS — register if you'll work for building contractors; see our CIS guide
Frequently Asked Questions
When do I need to register as self-employed?
By 5 October after the end of the tax year in which you started, if your self-employed income is more than £1,000. Registering as soon as you start is simplest.
Do I need to register if I earn less than £1,000?
Usually not. The £1,000 trading allowance covers small amounts of self-employed income. You may still register voluntarily, for example to pay Class 2 National Insurance.
How long does it take to get a UTR number?
HMRC usually posts your Unique Taxpayer Reference within a couple of weeks of registering, and it can take longer at busy times or if you're abroad.
Does a sole trader need a business bank account?
It isn't a legal requirement for sole traders, but a separate account makes record-keeping, tax returns and any HMRC questions much easier.
How much should I save for tax as a sole trader?
A common rule of thumb is 20–25% of your profit, and more in your first year because of payments on account.
Just Started Out on Your Own?
We'll register you with HMRC, set up simple record-keeping and file your first tax return — so there are no surprises.
Sardar Muhammad, AAT
Sardar is the founder of LimeTree Accounting Solutions, an AAT-accredited practice in Govanhill, Glasgow. He works with sole traders, tradespeople, landlords and small limited companies across Glasgow and Clydebank.
This guide is general information based on UK and Scottish tax rules as at 13 October 2026. It is not personal advice. Rates and thresholds change, so speak to us about your own situation.