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If you’re a self-employed sole trader and need to register for Self Assessment, you can either register online, or use a CWF1 form.

When does a sole trader need to register for Self Assessment?

You should register for Self Assessment by 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 2020, your first tax year was 2020/21, and your second tax year is 2021/22. You’ll need to make sure you register before 5th October 2021.

Do I need to register for Self Assessment if I work for an employer?

If the only income you earn is from an employer, and they deduct tax and NI from your wages, then you don’t need to worry. But if you have additional income that you earn from self-employment, then you must register for Self Assessment and pay tax on these earnings.

The good news is that you won’t need to register if your sole trader activities earn less than £1,000 per year, thanks to the trading allowance.

Why do sole traders have to register for Self Assessment?

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 collect the payment from you.

accounting services for sole traders

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 incur 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.

Do I need an NI number to register as a sole trader?

You will need a National Insurance number if you’re a sole trader registering for Self Assessment. If you don’t already have one, (for instance, you’ve moved to the UK from abroad) you can apply for your NI number online.

What happens after I register?

HMRC will issue you with a Unique Taxpayer Reference (UTR) number, and 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 made a loss or your earnings were under the Trading Allowance.

Get an online quote for accounting services for your sole trader business, or talk to an advisor using our live chat feature or by calling 020 3355 4047.

About The Author

Dean Salmon

I'm an AAT and ACA qualified Chartered Accountant with over 13 years experience working with businesses, contractors and sole traders. I also love watching live music, and quizzes! Learn more about Dean.

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