How to Register a Sole Proprietorship (Sole Trader) in the United Kingdom

In the UK, the most common way to become self-employed is by registering as a sole trader. It’s especially popular with freelancers, contractors, and small business owners because it’s affordable, flexible, and easy to manage. While other structures exist—such as partnerships or limited companies—sole trader status is often the simplest path to start working for yourself.

The process is straightforward: you register with HM Revenue & Customs (HMRC) for Self Assessment and receive a Unique Taxpayer Reference (UTR). There’s no requirement for start-up capital, and the entire registration can be completed online in just a few steps.

This structure gives professionals the freedom to launch their business with minimal barriers, making it the most widely used form of self-employment in the UK.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a Sole Proprietorship in the United Kingdom?

In the United Kingdom, a sole proprietorship is officially called a sole trader. It may also be described as:

• Sole trader
• Self-employed worker
• Independent contractor

All of these terms refer to one person legally running a business without forming a company.

How does a Sole Proprietorship (sole trader) work in the United Kingdom?

Sole trader vs other business structures in the United Kingdom

While a sole trader is the simplest way to be self-employed, there are alternatives like partnerships and limited companies.

Step-by-step: How to register a sole proprietorship in Spain

Step-by-step guide: How to register a sole proprietorship in the United Kingdom

Step 1: Check your eligibility

To register as a sole trader, you must be legally entitled to work in the UK. This applies to UK and Irish citizens, residents with the right to work, and visa holders whose conditions allow self-employment. You are required to register once your self-employed income exceeds £1,000 in a tax year, even if it’s from a side activity.

Step 2: Choose your business name

You can use your personal name or choose a business name. If opting for a business name, ensure it is unique and does not imply incorporation (e.g., it must not include “Limited” or “Ltd”). You can check name availability on the government website.

Step 3: Gather required documents

To register, you’ll need:

• National Insurance number
• Full name, address, and date of birth
• Proposed business name (if applicable)
• Description of your business activity
• Start date of trading

These details are entered into the HMRC online registration form.

Step 4: Register with HMRC

Log in to or create a Government Gateway account via HMRC, then register for Self Assessment as a sole trader. If you can’t register online, you can instead fill out form CWF1.

After submission, HMRC will send your Unique Taxpayer Reference (UTR) by post—typically within 10 working days (longer if abroad).

Step 5: Pay registration fees and contributions

Registering as a sole trader is free. You are responsible for paying income tax and National Insurance based on your profits. These payments are made via Self Assessment—usually one payment due by 31 January, with a second by 31 July if applicable.

Step 6: Complete post-registration obligations

Once registered, you must file an annual Self Assessment return, keep invoices and receipts for at least five years, and register for VAT if your turnover exceeds £90,000 a year. You are also responsible for managing invoicing and ensuring that all HMRC tax deadlines are met.

Financial and tax obligations for sole traders in the United Kingdom

• Income tax: Sole traders are taxed as individuals, not companies. Profits are declared annually through the Self Assessment system. The first £12,570 of income is tax-free. Earnings between £12,571 and £50,270 are taxed at 20%, income between £50,271 and £125,140 at 40%, and income above this at 45%. The personal allowance tapers once income exceeds £100,000. Tax returns must be filed by 31 January, with payments on account due in January and July where applicable.
• National Insurance contributions (NICs): Profits of £6,845 or more automatically count towards Class 2 NICs, so no payment is required unless you choose to make voluntary contributions below this threshold (£3.50 per week). If profits exceed £12,570, you must also pay Class 4 NICs: 6% on profits between £12,570 and £50,270, and 2% above £50,270. Both are collected through Self Assessment.
• VAT: Registration is compulsory if annual taxable turnover exceeds £90,000. Voluntary registration is allowed below this threshold and can be advantageous if you work with VAT-registered businesses. VAT-registered sole traders must file regular VAT returns and issue compliant invoices.
• Record-keeping: You must keep accurate records of income and expenses, including invoices, receipts, and bank statements, for at least five years after the relevant tax year.

Launch your contracting career and stay compliant with Deel

Registering a sole proprietorship a gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a sole trader in the UK?
None.

Do sole traders need to register for VAT?
Only if turnover exceeds £90,000/year, though you may register voluntarily.

How much are the standard contributions?
Sole traders pay progressive income tax after the £12,570 personal allowance, with rates of 20%, 40%, and 45% depending on profit levels. In addition, they pay National Insurance through Self Assessment: Class 2 contributions are credited once profits reach £6,845, and Class 4 contributions apply at 6% on profits between £12,570 and £50,270, and 2% on profits above that.

Can a sole trader hire employees?
Yes, but you must handle payroll and employer NIC.

How long does it take to register?
Registration online takes a few hours; UTR arrives in about 10 working days.

Can foreign nationals register as sole traders?
Yes, if you live in the UK or have the right to work here.

Do sole traders need a separate business bank account?
Not required, but recommended for accounting clarity.

What happens if I stop trading?
You must inform HMRC and stop filing Self Assessment returns for self-employment.

Are there any government incentives for new sole traders?
Not specific ones, though certain grants and schemes may apply depending on your sector.

Can I use Deel as a sole trader to get paid internationally?
Yes. Deel supports payments from global clients in multiple currencies.

Does Deel generate compliant invoices for sole traders?
Yes. Deel automatically issues invoices that meet UK tax requirements.

Can Deel help with taxes?
Yes. Deel provides downloadable tax reports and payment records to simplify Self Assessment.

Does Deel offer contracts for freelancers and sole traders?
Yes. Deel includes contract templates compliant with UK law.

Can I access benefits through Deel as a sole trader?
Yes. Deel offers optional perks like health insurance and retirement savings plans.