How to become a self-employed tradesperson

By Software for Tradespeople Editorial Team · Updated 12 October 2026 · Facts checked 12 Oct 2026 · 8 min read

Quick answer

To become a self-employed tradesperson, register for Self Assessment with HMRC once you earn over £1,000 in a tax year, by 5 October after that tax year ends. Then register for CIS if you work for contractors, get insurance, keep digital records, and file your tax return and pay by 31 January. Registration is free.

On this page

What do you need to do, in short?
Who does this apply to?
How do you become self-employed, step by step?
What are the costs and deadlines?
Worked example: an electrician going self-employed
How much should you charge when you start?
What mistakes do new tradespeople make?
What software does a new tradesperson need?
FAQs

Going self-employed as an electrician, plumber, builder or any other trade is mostly about getting a few things right early: registering with HMRC on time, setting money aside for tax and looking professional from the first quote. Here is the full checklist, with GOV.UK rules and 2026/27 figures checked on 12 October 2026.

General information, not tax advice. This page explains HMRC's published rules. Check your own situation with HMRC or a qualified accountant before you act.

What do you need to do, in short?

Register for Self Assessment once you earn over £1,000 in a tax year, by 5 October after that tax year ends. It is free.
Register for CIS if you will do construction work for contractors, or they must take 30% instead of 20%.
Get insurance: public liability in practice, and employers' liability by law once you take someone on.
Keep records of every sale and cost from day one, ideally in an app.
Set aside money for tax and file your return by 31 January after each tax year.
Watch two thresholds: £90,000 for VAT and the Making Tax Digital limits (£30,000 from April 2027, £20,000 from April 2028).

Who does this apply to?

Anyone starting to work for themselves in a trade: leaving an employer to go it alone, doing side jobs on top of a PAYE job, or finishing an apprenticeship and setting up. The rules here are for sole traders, which is how most tradespeople start. If you are thinking of a limited company from day one, read our sole trader vs limited company guide first: for a one-person business drawing out all its profit, a sole trader often keeps more in 2026/27.

Are you really self-employed?

GOV.UK says you are probably running a business if you bear the risk, have several customers at once, control how, where and when you work, can hire help at your own expense, supply the main equipment, fix unsatisfactory work in your own time and charge an agreed price. If you work full time for one firm, on their terms, with their tools, you may be an employee in all but name, and the firm should be running PAYE.

Self-employment registration and tax rules are UK-wide, but income tax bands differ in Scotland, and employers' liability rules in Northern Ireland are separate from those in England, Scotland and Wales.

How do you become self-employed, step by step?

Pick your business name. You can trade under your own name or a trading name. Check it is not already used by another local trade business.
Register for Self Assessment as a sole trader on GOV.UK. You need to register once you earn more than £1,000 in a tax year, and you can register earlier. HMRC sends you a Unique Taxpayer Reference (UTR).
Register for CIS if you will work for builders or main contractors. You can do Self Assessment and CIS together by choosing the subcontractor option. See our CIS registration guide.
Open a separate bank account for the business. It is not a legal requirement for sole traders, but it makes records, tax returns and MTD far easier.
Arrange insurance. Public liability for damage or injury to customers and the public, tools and van cover, and employers' liability (at least £5 million) as soon as you employ anyone outside your family.
Check your trade's competence rules. For example, gas work requires Gas Safe registration, and electricians doing notifiable work usually join a competent person scheme.
Set up quotes and invoices that look professional. Our free invoice templates for tradespeople include standard, VAT and CIS versions.
Keep records from day one: every invoice, every receipt and your business mileage.
Save for tax. Moving 20% to 25% of each payment into a separate pot is a common rule of thumb, but work it out from your own figures.
File your Self Assessment return and pay by 31 January after each tax year.

What records should you keep from day one?

GOV.UK says that when you start trading you must keep records so you can work out your profit or loss. For a tradesperson, that means:

every quote and invoice, and the date each one was paid,
receipts for materials, tools, workwear, van costs, phone, insurance and software,
a log of business mileage (date, job, miles), which our mileage allowance guide explains,
CIS payment and deduction statements if you work for contractors, and
bank statements for your business account.

Photograph paper receipts as soon as you get them. Thermal till receipts from merchants fade within months.

What are the costs and deadlines?

Registering with HMRC is free. Your costs are tax, National Insurance, insurance, tools, a vehicle and software.

2026/27 tax rates for sole traders (England, Wales and NI; source: GOV.UK, checked 12 Oct 2026)
Item	2026/27
Trading allowance	£1,000 (instead of expenses, not as well as)
Personal Allowance	£12,570
Income tax	20% to £50,270, 40% to £125,140, 45% above
Class 4 National Insurance	6% on profits from £12,570 to £50,270, 2% above
Class 2 National Insurance	Treated as paid at profits of £7,105 or more. Voluntary £3.65 a week below that

Key Self Assessment deadlines (source: GOV.UK, checked 12 Oct 2026)
Deadline	What
5 October after the tax year ends	Tell HMRC you need to file (register)
31 October after the tax year ends	Paper tax return
31 January after the tax year ends	Online tax return, tax bill and first payment on account
31 July	Second payment on account

Miss the online deadline and the penalty is £100 straight away, then £10 a day after 3 months (up to £900), then 5% of the tax due or £300 (whichever is more) at 6 and again at 12 months. Late tax also attracts 5% penalties at 30 days, 6 months and 12 months, plus interest.

Worked example: an electrician going self-employed

Jo leaves a PAYE job and starts as a self-employed electrician on 1 November 2026, with no other income for the rest of the tax year.

Year 1: 1 November 2026 to 5 April 2027

Register by 5 October 2027 (better: straight away).
Profit for the period: £15,000. Assume Jo's PAYE pay earlier in the year used none of the Personal Allowance (in practice, check your P45).
Income tax: (£15,000 minus £12,570) × 20% = £486.
Class 4 NI: (£15,000 minus £12,570) × 6% = £145.80.
Total £631.80, due by 31 January 2028. Under £1,000, so no payments on account.

Year 2: 2027/28

Jo's profit rises to £36,000. Using the 2026/27 rates above:

Income tax: (£36,000 minus £12,570) × 20% = £4,686.
Class 4 NI: £23,430 × 6% = £1,405.80.
Total £6,091.80, due by 31 January 2029.
Because this bill is over £1,000, HMRC also asks for a first payment on account for 2028/29 on the same day: half of £6,091.80, which is £3,045.90.
Total due on 31 January 2029: £9,137.70, then another £3,045.90 on 31 July 2029.

This "double bill" in the second January is the biggest shock for new sole traders. Saving a share of every payment from day one is the fix.

When does Jo need Making Tax Digital?

MTD looks at gross turnover, not profit. If Jo's turnover for 1 November 2026 to 5 April 2027 (the 2026/27 tax year) is over £20,000, Jo must use MTD for Income Tax from 6 April 2028. Jo's profit was £15,000, but once materials invoiced to customers are added, turnover could easily pass £20,000. Choosing MTD-ready software from the start avoids a second switch later. Our Making Tax Digital guide has the full rules.

How much should you charge when you start?

New sole traders often price from their old hourly wage. That leaves nothing for the costs an employer used to cover: holidays, sick days, the van, tools, insurance, software, training, pension and the time you spend quoting and doing paperwork.

A simple way to set a minimum day rate:

Decide your target profit for the year, before tax. Say £36,000.
Add your yearly business costs. Van, fuel, insurance, tools, phone, software and accountant: say £12,000.
Count your billable days. 52 weeks minus holidays, bank holidays and sick time leaves about 44 working weeks. If quoting, travel and admin eat half a day a week, that is 4.5 billable days a week, or 198 days.
Divide. (£36,000 + £12,000) ÷ 198 = about £242 a day, before materials and markup.

Our day rate calculator does this for you, and our markup vs margin guide shows how to price materials so they make money rather than just covering cost. Check your rate against what local competitors charge, then quote with confidence.

What mistakes do new tradespeople make?

Not registering on time. The 5 October deadline is easy to miss in your first year.
Spending the tax money. Especially before the first January bill and payment on account land together.
Not registering for CIS and losing 30% instead of 20% on contractor work.
Claiming the £1,000 trading allowance when expenses are higher. With a van and tools, actual expenses usually win.
Mixing personal and business spending in one account.
Underpricing. Your rate must cover holidays, sick days, van, tools, insurance and tax, not just your old hourly wage.
Working without insurance, or employing someone without employers' liability cover (fines of up to £2,500 a day).
Keeping records in a notebook, then having to change everything when Making Tax Digital arrives.

What software does a new tradesperson need?

At the start, you need three things: professional quotes and invoices, a diary for jobs, and a way to record costs for your tax return. A job management app covers all three and saves hours of evening paperwork. Our guide to the best apps for tradesmen compares the main options by price and trade.

For most new sole traders who plan to grow, our pick is Tradify. Its UK pricing page (checked 12 October 2026) lists £34 per user a month on Lite, £37 on Pro and £44 on Plus (VAT treatment not stated on the pricing page), with a 14-day free trial. Xero, Sage and QuickBooks Online links are included on every plan, and UK certificates such as EICRs and gas safety records come with Pro. It is rated 4.8 on Trustpilot from 610 reviews (checked 12 Oct 2026). The downsides: per-user pricing adds up as you hire, and the AI features are only on Plus.

Try Tradify free (Ad) Read our Tradify review

If you want Making Tax Digital built into the same app on a budget, look at Powered Now, which is HMRC-recognised for MTD (see our Powered Now review).

Our verdict

Register for Self Assessment (and CIS if you work for contractors) the week you start, open a separate account, get public liability insurance and save a share of every payment for tax. Use a job app from day one so your quotes look professional and your records are ready for Making Tax Digital.

Frequently asked questions

How do I register as self-employed in the UK?

Register for Self Assessment as a sole trader on GOV.UK. You must do this if you earn more than £1,000 from self-employment in a tax year (6 April to 5 April), and you must tell HMRC by 5 October after the end of that tax year. You will get a Unique Taxpayer Reference (UTR), which you need for your tax return and for CIS.

When is the deadline to register as self-employed?

5 October after the end of the tax year in which you started. If you started on 1 November 2026, that is in the 2026/27 tax year, which ends on 5 April 2027, so you must register by 5 October 2027. GOV.UK says telling HMRC late could lead to a penalty, so register as soon as you start.

Do I pay tax in my first year of self-employment?

Only on profit above your allowances. In 2026/27 the Personal Allowance is £12,570 across all your income, and Class 4 National Insurance starts on profits over £12,570. Your first tax bill is due by 31 January after the tax year ends. If that bill is £1,000 or more, you will usually also make payments on account towards the next year.

What is the £1,000 trading allowance?

It is a tax exemption of up to £1,000 a year of trading income. If your gross self-employed income is £1,000 or less, you do not need to register or pay tax on it. Above that, you can deduct the £1,000 allowance instead of your actual expenses, but not both. Most tradespeople with real costs are better off claiming expenses.

Do I need insurance to be a self-employed tradesperson?

Public liability insurance is not a legal requirement, but most customers, contractors and letting agents will expect it. Employers' liability insurance is a legal requirement once you employ someone, with at least £5 million of cover, and you can be fined £2,500 a day without it. Family-only employers are exempt.

Do I need to register for VAT when I go self-employed?

Only if your taxable turnover goes over £90,000 in any rolling 12 months, or you expect it to go over £90,000 in the next 30 days alone. You can register voluntarily below that, which can suit trades who work mainly for VAT-registered contractors. Most new sole traders working for homeowners stay unregistered until they must.

Am I self-employed or an employee?

GOV.UK lists signs you are probably running a business: you bear the risk, have several customers, control how and when you work, can hire help at your own expense, supply the main equipment, fix bad work in your own time and charge an agreed price. If you work full time for one firm under its control, you may be an employee instead.

Sources and checks

Prices, features and ratings were checked on 12 October 2026 against these sources. Software prices change often, so confirm on the vendor's site before you buy.