How to register as a sole trader

The short answer: In 2026/27 you register as a sole trader by signing up for Self Assessment if your gross trading income is over £1,000. From 6 April 2027 that line moves to £3,000, as the trading allowance trebles. You have until 5 October after the end of the tax year to tell HMRC.

Registering as a sole trader just means telling HMRC that you're self-employed. It doesn't mean setting up a company, and you don't need to pay a company formation service to do it. You do it yourself, through HMRC's own online service.

When do I need to register as a sole trader?

You need to register if your gross trading income is more than £1,000 in a tax year (6 April to 5 April). That's the rule HMRC sets out for sole traders in 2026/27.

"Gross" means before expenses, with all your trades added together. So if you sell candles and do a bit of dog walking, both count towards the same total (HMRC: trading allowance).

The £1,000 figure comes from the trading allowance. It lets you earn a small amount from self-employment, casual jobs like babysitting or gardening, or hiring out your own tools, without paying tax on it.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

The line moves next April:

Assumes none of the exceptions below apply. Figures from HMRC's trading allowance guidance and the Budget 2026 trading allowance note.

You can start trading straight away and register later, as long as you meet the deadline. You can also register earlier if you'd rather get it out of the way.

When does the trading allowance go up to £3,000?

The trading allowance rises from £1,000 to £3,000 on 6 April 2027, for the 2027/28 tax year onwards. The government announced it in the Autumn Budget on 28 October 2026 (HMRC: Income Tax, increasing the trading allowance).

Two things change at once:

• the tax-free amount, so you can earn up to £3,000 of trading income a year without paying tax on it

• the reporting threshold, so you only have to report trading income through Self Assessment once it's over £3,000

HMRC's impact note says up to 1.4 million people could benefit. It estimates 400,000 will pay less tax, by £380 on average, and 100,000 will no longer need to report their trading income at all.

It's announced but not yet law. The change will be made in the Finance Bill 2026-27, according to the same note. Until 5 April 2027, the £1,000 rule still applies, which is why HMRC's own pages still say £1,000.

Do I need to register as self-employed if I earn under £3,000?

Not yet. In 2026/27 the limit is still £1,000, so gross trading income between £1,000 and £3,000 this tax year does mean registering.

From 2027/28, if your gross trading income is £3,000 or less, you usually won't need to tell HMRC about it. HMRC calls this "full relief", and it comes with one condition: you must keep records of the income anyway. Invoices, a simple spreadsheet, payment emails and bank statements all count.

There are some cases where the allowance doesn't apply at all. You can't use it on income from:

• a company that you, or someone connected to you, owns or controls

• a partnership where you or someone connected to you is a partner

• your employer, or your spouse's or civil partner's employer

The allowance also doesn't cover your share of a partnership's trading income. All of these come from HMRC's guidance on when you can't use the allowance.

If you're already in Self Assessment and no longer need to be, tell HMRC as soon as possible so it can stop sending you returns.

When should I register even if I earn less than the allowance?

Registering can work in your favour, even when your income is small. HMRC says you must register and send a return, even under the allowance, if you want to:

1. claim relief for a loss

2. pay voluntary Class 2 National Insurance, which can help you qualify for some benefits

3. claim Tax-Free Childcare based on your self-employment

4. claim Maternity Allowance based on your self-employment

That list is from HMRC's trading allowance guidance. You also need to register if you're a subcontractor in the Construction Industry Scheme.

Voluntary Class 2 matters if your profits are low. If your profits are £7,105 or more, Class 2 is treated as paid. Below that, you can choose to pay it at £3.65 a week in 2026/27 (HMRC: self-employed National Insurance rates). It fills gaps in your National Insurance record, and you usually need at least 10 qualifying years to get any State Pension (HMRC: voluntary National Insurance). There's more in our guide to self-employed National Insurance and your State Pension.

Is selling my old stuff trading?

Selling your own unwanted things usually isn't trading. Buying or making things to sell for profit may be. HMRC says you're likely to be trading if you:

• sell regularly to make a profit

• make items to sell for profit

• sell items regularly online, at car boot sales or through adverts

• earn commission selling goods for other people

• get paid for a service you provide

That list comes from the working for yourself guide. If you only sell now and then, HMRC has a short check for extra income that tells you whether to report it.

One catch: "not trading" doesn't mean every sale is tax-free. If you sell a personal possession, like jewellery or a painting, for £6,000 or more, Capital Gains Tax may apply.

Example: a side business before and after April 2027

Made-up numbers to show how the rules work.

Sam has a day job and sells handmade candles at weekends (the flat has never smelled better). Sales come to £2,400 a year, and materials cost £300.

Assumes Sam has no connected-party income and doesn't want to register for any of the reasons above.

In 2026/27, Sam can take off either the £1,000 allowance or the £300 of real costs, but not both. The allowance gives the lower profit here. If Sam's costs were higher than £1,000, claiming them would usually work out better. Our guide to what a sole trader can claim as a business expense goes through the options.

In 2027/28 the whole £2,400 sits under the new £3,000 allowance, so there's no tax on it. Sam still keeps a record of the sales, though.

If Sam's candle stall grows to £4,000 in 2027/28, Sam would need to register by 5 October 2028.

What is the deadline to register as a sole trader?

The deadline is 5 October after the end of the tax year in which you went over the limit (HMRC: Self Assessment deadlines).

So if you start in August 2026 and your income passes £1,000 in 2026/27, you'd need to register by 5 October 2027. Your online return and any tax for that year would then be due by 31 January 2028. If you have to make payments on account, there's a second payment date on 31 July.

Miss the 5 October deadline and HMRC will give you a new filing date, 3 months from its letter. You still have to pay by 31 January. If you register late and don't pay all your tax by then, you may get a "failure to notify" penalty, based on what's still unpaid. Filing late brings an initial £100 penalty too.

You don't have to wait for October, though. Registering early gives you time to sort out any sign-in or identity checks.

How do I register as a sole trader?

You register using HMRC's registration service. Have these ready:

• your National Insurance number (you can't register without one)

• your contact details

• your business start date

• your trading name, if you use one

• a short description of your work

Follow the sign-in and identity steps the service gives you. The route can differ if you've filed returns before or already have a Unique Taxpayer Reference (UTR). If you're already in Self Assessment for another reason, you still need to register your self-employment. Use the route for your situation, rather than trying to get a second UTR.

You can trade under your own name. If you pick a business name, it can't include "Limited" or "Ltd", be offensive, or be too similar to someone's trade mark. Your name, and any business name, must go on invoices and letters.

You can be employed and self-employed at the same time. Having a day job doesn't change the rule: if your side income is over the limit, you still register.

What should I set up after registering?

Keep records from day one. As a sole trader you must keep records of your business income and costs. Cash basis is now the default, which means you record money when it actually comes in or goes out.

A simple routine helps:

• keep business money separate so it's easy to spot, and check your bank account's terms allow business use

• put money aside for tax as you're paid, and review your tax reserve now and then

• keep an eye on your turnover, and check when Making Tax Digital applies to you

• keep tidy records, which also helps later if you apply for a mortgage as a sole trader

It also helps to keep your records, your reference number and your deadlines in one place, so nothing sneaks up on you.

Still got questions?

Is my first year as a sole trader tax-free? Not as such. Your first £12,570 of total income is usually covered by the Personal Allowance in 2026/27, and that includes any wages. Profit above it is taxed in the normal way.

How much does it cost to register as a sole trader? You register directly with HMRC through its own online service. You don't need a company formation service.

Can I use the trading allowance and claim expenses? Not both. You either take off the allowance or your actual costs, whichever works out better for you.

Is the £3,000 trading allowance law yet? Not yet. It was announced on 28 October 2026 and is due to be made law in the Finance Bill 2026-27, starting 6 April 2027.

Does the £3,000 apply to this tax year? No. For 2026/27, which ends on 5 April 2027, the allowance and the reporting line are still £1,000.

What if I'm not sure whether I'm trading? Use HMRC's check for extra income, or contact HMRC through the working for yourself guide.