Sole trader or limited company?
This is the first decision and most people overthink it. The short answer: start as a sole trader unless you have a specific reason not to.
As a sole trader, you register with HMRC for Self Assessment, file a tax return once a year, and you're trading. That's it. No Companies House filings, no annual accounts, no director's responsibilities.
A limited company starts to make financial sense when your taxable profit is consistently above £40,000–£50,000. Below that, the extra accountancy fees and admin eat into whatever tax you'd save. Your accountant can run the numbers when you get there.
The practical difference
Sole trader: simpler tax, less paperwork, you keep everything after tax. Limited company: more tax-efficient at higher earnings, limited liability, but you're a company director with legal duties. Most tradesmen start sole trader and switch after year one or two when the turnover justifies it.
Registering with HMRC
You need to register for Self Assessment with HMRC as soon as you start working for yourself. Do it online at gov.uk — it takes about ten minutes. You'll get a Unique Taxpayer Reference (UTR) in the post within a couple of weeks.
If you're going sole trader, that's your main registration. You'll file a Self Assessment tax return each year covering 6 April to 5 April, and pay your income tax and National Insurance through that.
VAT registration is only compulsory once your taxable turnover hits £90,000 in any rolling 12-month period (as of April 2026). Below that, it's optional. Some tradesmen register voluntarily to claim VAT back on materials and tools — worth discussing with an accountant, especially if you're buying a lot of kit early on.
Insurance you actually need
Not everything the insurance broker tries to sell you. Here's what matters:
- Public liability insurance — non-negotiable. Covers damage to property or injury to third parties. Most main contractors won't let you on site without it. Typically £2m–£5m cover, costs around £300–£600 a year depending on your trade.
- Professional indemnity — required if you're signing off work (electricians, gas engineers, anyone doing design). Covers you if your professional advice or work causes a financial loss.
- Employers' liability — legally required as soon as you employ anyone, even a labourer for a single day. £10m cover minimum.
- Tool insurance — optional but painful when you need it. Replacing a van full of tools out of pocket can set you back thousands.
- Van insurance — business use, not just social and commuting. Check your policy covers tools in transit if you don't have separate tool cover.
Get this sorted before your first job
Public liability is the one that catches people out. A customer asks for your insurance certificate and you haven't got one — you look amateur before you've started. Get it in place before you quote your first job.
Realistic start-up costs
You don't need to spend a fortune to start. But you do need to budget properly. A realistic range for most trades:
£1,500–£3,000 covers the essentials — public liability insurance, basic marketing (business cards, Google Business Profile), any tools you don't already own, initial fuel costs, and a small buffer for materials on your first jobs before you get paid.
Things that can wait: a van wrap, a professionally designed website, branded workwear, expensive accounting software. None of these make the phone ring. Get the work first, invest in the polish later.
Things that can't wait: insurance, HMRC registration, a separate business bank account (Starling and Tide both offer free ones), and a way for customers to find you — which brings us to the next bit.
Setting your prices
This is where most new tradesmen get it wrong. Either they price too low to win work and then can't sustain it, or they pluck a number from thin air and wonder why nobody's biting.
Start with your costs, not your competitors' prices. Work out what you need to cover each month: van payment, fuel, insurance, phone, materials float, tax (set aside 25–30% of everything you earn), and what you actually want to take home. Divide that by the number of billable days you'll realistically work. That gives you your minimum day rate.
For most trades in 2026, a sole-trader day rate in the UK sits between £200 and £350 depending on your trade, your area, and your experience. Specialists (gas, electrical, groundworks) sit higher. General labourers and handymen sit lower. London and the South East push everything up.
Price the job, not the hour
Customers don't want to hear "£45 an hour" — they want to know what the job costs. Quote per job whenever you can. You'll earn more on the jobs you're fast at, and you remove the awkward conversation about how long things take. If you need help building a rate card, read our pricing guide.
Finding your first customers
Your first ten customers will almost certainly come from people you already know. That's not a weakness — that's how every trade business starts.
The free stuff that works
Google Business Profile. Set one up. It's free. Add your trade, your service area, your phone number, and a few photos of your work. When someone searches "plumber near me" or "landscaper in [your town]", this is what shows up. It's the single most valuable free tool for a tradesman.
Word of mouth. Tell everyone you know that you've gone self-employed. Former colleagues, mates, family, the bloke at the gym. People can't recommend you if they don't know you're available. Do good work, and ask every happy customer for a Google review. Five genuine reviews puts you ahead of half the tradesmen in your area who haven't bothered.
Facebook groups and local community pages. Not to hard-sell. To be visible and helpful. Answer questions, share advice, mention what you do when it's relevant. The work comes from being known, not from posting your price list.
The paid stuff — when you're ready
Once you've got a few reviews and a Google Business Profile set up, paid ads become worthwhile. Google Ads targeting "[your trade] + [your town]" puts you in front of people actively searching for what you do. Start small — £10–£20 a day — and measure what comes back.
Lead generation platforms (Checkatrade, MyBuilder, Bark) can work for some trades, but the leads are shared with other tradesmen and the conversion rate varies. Test one and track whether the cost per actual job makes sense.
The admin nobody warns you about
This is the bit that kills most sole-trader tradesmen. Not the work — the work's fine. It's everything around it.
Quoting. Chasing quotes. Invoicing. Chasing invoices. Scheduling. Rescheduling. Answering the phone while you're on a job. Following up with customers who said they'd "get back to you." Doing your receipts on a Sunday night. Filing your tax return at 11pm on 31 January.
Most tradesmen spend 8–12 hours a week on admin on top of their actual work. That's a full day and a half every week that you're not earning. It's also the reason most tradesmen eventually burn out or plateau — not because they can't do the work, but because they can't run the business and do the work at the same time.
There are two options here. You either build systems (templates for quotes, accounting software like Xero or QuickBooks, a basic CRM to track jobs) and spend your evenings doing it yourself. Or you pay someone to handle it. That's where services like ScaleUp exist — but more on that at the end.
CIS — if you're working for contractors
If you're doing subcontract work for a main contractor (rather than working directly for homeowners), you'll deal with CIS — the Construction Industry Scheme.
Here's the short version: your contractor deducts tax from your payments before paying you. If you're registered with HMRC for CIS, they deduct 20%. If you're not registered, they deduct 30%. Either way, you claim it back through your Self Assessment return — it counts as tax already paid.
Register for CIS with HMRC. It's free. The deductions aren't extra tax — they're advance payments against your tax bill. But if you're not tracking them properly, you'll lose money you're owed when it comes to your tax return.
CIS and VAT reverse charge
If you're VAT-registered and doing CIS work, the domestic reverse charge rules mean you don't charge VAT on your invoices to other VAT-registered contractors — the contractor accounts for the VAT instead. Get this wrong and HMRC will correct you, and it's a headache. Ask your accountant to set your invoicing up properly from day one.
Common mistakes in the first year
Not putting tax money aside. You'll get your first tax bill roughly 18 months after you start earning. If you haven't been setting aside 25–30% of your income from the start, it lands like a brick. Open a separate savings account and move the money every time you get paid. Don't touch it.
Pricing too low to "get your name out there." Cheap work attracts cheap customers. They're the ones who haggle, pay late, and never refer anyone. Price fairly from the start — you'll attract better customers and you won't resent every job you're on.
Saying yes to everything. Not every job is worth doing. If the job's too small, too far away, or the customer's already being difficult at the quote stage, it's going to cost you more than you earn. Learn to say no early.
No written quotes. "I'll do it for about a grand" said over the phone is not a quote. It's a future argument. Put everything in writing — scope, price, what's included, what's not, payment terms. It protects you and it looks professional.
Ignoring the back office. The quote you didn't send, the invoice you forgot to chase, the review you didn't ask for — they all add up. Every missed follow-up is lost money. Get a system in place from month one, even if it's basic.