Taking the leap into self-employment is exciting, but the admin side can feel overwhelming. The good news is that setting up as a sole trader is simpler than most people expect. Here's everything you need to have in place in your first month.
1. Register with HMRC
The first thing to do is let HMRC know you're self-employed. You need to register for self assessment by 5 October following the end of your first tax year of trading. So if you started trading in the 2025/26 tax year, you need to register by 5 October 2026.
You can register online at gov.uk. You'll need a Government Gateway account - if you don't have one, you'll create one as part of the process. Once registered, HMRC will send you a Unique Taxpayer Reference (UTR) number by post. Keep this safe - you'll need it every year.
2. Open a business bank account
You're not legally required to have a separate business bank account as a sole trader, but it makes your life significantly easier. Mixing business and personal transactions in one account creates a headache at self assessment time.
The good news is there are several excellent free options designed specifically for sole traders - Starling, Monzo Business and Tide all offer free accounts with no monthly fee. You can compare options in our Business Banking directory.
3. Choose your accounting software or tracking method
From day one you need to be keeping records of your income and expenses. How you do that is up to you - dedicated accounting software, a spreadsheet, or even a simple notebook - but the earlier you start the better.
If your gross income is over £50,000 you're now required to use HMRC-recognised Making Tax Digital software. If you're below that threshold, you have more flexibility for now - though MTD will apply to everyone earning over £20,000 by 2028.
You can browse accounting software options in our Accounting & Bookkeeping directory or find spreadsheet tools in our Spreadsheet & Planning Tools directory.
4. Understand what expenses you can claim
One of the biggest advantages of being self-employed is the ability to offset business expenses against your income, reducing your tax bill. Allowable expenses include things like:
Office costs - stationery, printer ink, a portion of your home office costs
Travel - business mileage, train fares, parking
Equipment - tools, computers, software
Marketing - website costs, advertising
Professional fees - accountant fees, insurance
Keep receipts for everything. If you're going paperless, a receipt capture app makes this much easier - see our Receipt Capture directory.
5. Set aside money for tax from day one
This is the one thing most new sole traders wish they'd done from the start. Unlike employment where tax is deducted automatically, as a sole trader you pay tax on your profits via self assessment - and it can feel like a shock if you haven't been saving for it.
A rough rule of thumb is to set aside 25-30% of your profits for tax and National Insurance. The exact amount depends on your income level and circumstances.
6. Think about your website
If you're offering services or selling products, you'll need somewhere online for potential customers to find you. Hostinger is a good value option for sole traders building their first website - plans start from just a few pounds a month and include a website builder that's straightforward to use even without technical experience.
7. Get the right tools in place
Beyond accounting software and banking, there are a handful of other tools that make life easier as a sole trader - invoicing software, mileage trackers, time tracking if you bill by the hour. You can browse everything in the Sole Trader Toolkit directory.
One step at a time
You don't need to have everything perfect from day one. Register with HMRC, open a bank account, start tracking your income and expenses - those three things are the foundation. Everything else can follow as your business grows.
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