Becoming a sole trader can be a life changing decision to make, one which may start with a steep learning curve. Tax is just one of the areas you will need to learn about, but before all of this you must register with HMRC as a sole trader.
You Can Register as a Sole Trader Online with HMRC
As part of setting up your business you must let HMRC know that you are in business for yourself, you can do that online here.
Once this process is completed HMRC will send you a UTR number (Unique Tax Payers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return and to set up a Government Gateway Account so you can file your personal tax return online.
When Should You Register as a Sole Trader?
The registration process takes around 10 days but I would advise registering ass soon as possible so that you give yourself enough time to keep all your tax affairs in order. The official guidance from HMRC is that you should make sure you are registered by 5th October in your second tax year.
What Details Do You Need to Register?
As part of the application you will need to provide various pieces of personal information including:
- Date of Birth
- National Insurance Number
- Telephone number
- Email address
- Some details of your business type
What Are You Responsible For?
As a sole trader you are responsible for filling in a Self Assessment Tax Return which is HMRCs form summarising your earnings, working out how much tax and national insurance you need to pay. You must then pay all the tax and national insurance you owe over by 31 January each year (along with making a payment on account by 31 January and July each year).
Sole Trader Tax: Work Out What You Need to Pay