Set up as a sole trader

To set up as a sole trader, you need to register for register for Self Assessment and file a tax return every year.

Your responsibilities as sole trader

You'll need to:

• keep records of your business's sales and expenses
• keep VAT records if you’re registered for VAT
• keep PAYE records if you have employees
• send a Self Assessment tax return every year
• pay Income Tax on your profits and Class 2 and Class 4 National Insurance - use HMRC's calculator to help you budget for this

You'll need to apply for a National Insurance number if you're moving to the UK to set up a business.

Accounting methods

From the 2024 to 2025 tax year, the cash basis is the default way of doing your accounts. You must opt out if you want to use traditional accounting or if you can't use cash basis accounting.

With cash basis, you only record income and expenses when money comes in or goes out. This means you only pay Income Tax on the money you actually receive during your accounting period.

Registering for VAT

You must register for VAT if your turnover is over £90,000. You can register voluntarily if it suits your business, for example if you sell to other VAT-registered businesses and want to reclaim the VAT. Read guidance on VAT registration.

Working in the construction industry

Register with HMRC for the Construction Industry Scheme (CIS) if you're working in the construction industry as a subcontractor or contractor.