Depending on how much you earn as a sole trader, you might need to register for Self Assessment so you can pay the right amount of tax on your income.

As a sole trader, you’re responsible for paying the right amount of tax and National Insurance on your self-employed earnings. Registering for Self Assessment enables you to submit a yearly tax return so that HMRC know how much you owe, and can collect the payment from you.

Sole traders can earn up to a total of £1,000 from self-employment in a tax year before they need to register for Self Assessment and send tax returns to HMRC. If your sole trader business earns less than the £1,000 trading allowance, you won’t need to register.

What about if I work for an employer at the same time?

Lots of people have a hobby business or side hustle that they run whilst working for an employer. You can still use the £1,000 trading allowance against the earnings you make as a sole trader, even if you work for someone else at the same time.

For example, if you have a job with a salary of £22,000, and a sole trader business which earns £800 in a tax year, you’ll still be below the trading allowance’s threshold, so you won’t necessarily need to register for Self Assessment (unless you need to register for a different reason).
 

You should register for Self Assessment no later than 5th October in your second tax year of business. The tax year runs from 6th April to 5th April, so if you started trading in November 2023, your first tax year was 2023/24, and your second tax year is 2024/25. You’ll need to make sure you register for Self Assessment before 5th October 2024.

You can register for Self Assessment as a sole trader online using your Government Gateway account. These are quick to set up if you don’t already have one, but the rest of the process can take a little longer, so leave yourself plenty of time before the deadline!

If you have been registered for Self Assessment in the past, you can reactivate your registration using a CWF1 form (rather than creating a brand new record, which might cause confusion).

What happens if I don’t register?

Failure to notify HMRC that you need to register for Self Assessment as a sole trader, even if it wasn’t deliberate, can result in a penalty.

These penalties are chargeable in addition to paying the tax which is due, with extra fines added the longer you leave it. You might be able to reduce a penalty by making a voluntary disclosure.

HMRC will issue you with a Unique Taxpayer Reference (UTR) number which identifies your tax records for the business. Your Unique Taxpayer Reference (UTR) will be sent by post which normally takes around 15 working days (or 21 days if you’re abroad), but you can access it sooner in your Personal Tax Account or with the HMRC app.

You’ll need to complete a Self Assessment tax return every year, unless you tell HMRC that you have stopped trading. If you continue trading, you’ll need to submit a return even if you make a loss or your earnings are under the Trading Allowance.

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