How to Start a Trade Business in the UK — A Complete Step-by-Step Guide

Going self-employed as a tradesperson is one of the most rewarding career moves you can make. You set your own hours, choose your own jobs, and there is no ceiling on what you can earn. But the freedom comes with responsibility. You need to get the business side right from day one, or you risk costly mistakes that could have been avoided with a bit of planning.

This guide covers everything you need to know about setting up as a tradesperson in the UK. Whether you are an electrician, plumber, builder, carpenter, decorator, or any other trade professional, these steps will help you start on solid ground.

Step 1: Decide Your Business Structure

The first decision you need to make is how to register your business. In the UK, there are two main options for tradespeople: sole trader or limited company.

Sole Trader

Most tradespeople start as sole traders because it is the simplest route. You register with HMRC for self-assessment, and that is essentially it. There is no cost to register, no Companies House filing, and your accounting is straightforward. You report your income and expenses on a self-assessment tax return once a year and pay income tax and National Insurance on your profits.

The main downside is that you are personally liable for any business debts. If something goes wrong — a contract dispute, an accident, an unpaid supplier — your personal assets are on the line. In practice, good insurance covers most of these risks, and the vast majority of sole trader tradespeople never encounter serious liability issues.

Limited Company

A limited company is a separate legal entity. It offers liability protection — if the company gets into debt, your personal assets are generally protected. It can also be more tax-efficient once your profits exceed around fifty thousand pounds, because you can pay yourself through a combination of salary and dividends.

The downsides are more paperwork, compulsory accounts filed with Companies House, and higher accountancy costs — typically six hundred to fifteen hundred pounds per year compared to two hundred to five hundred pounds for a sole trader. You also have more responsibilities as a company director.

For a deeper comparison, read our guide on sole trader vs limited company for tradespeople.

The Practical Advice

Start as a sole trader. It is free, simple, and you can always convert to a limited company later when your turnover justifies the extra complexity. You can register as a sole trader on the HMRC website in about ten minutes.

Step 2: Register With HMRC

Once you have decided on your structure, you need to tell HMRC you are self-employed. If you are going sole trader, register for self-assessment on the GOV.UK website. You need to do this by the fifth of October in your business's second tax year, but it is best to register straight away so you do not forget.

You will receive a Unique Taxpayer Reference (UTR) number in the post within a couple of weeks. Keep this safe — you will need it for your tax returns and it is often requested by contractors and agencies.

If you are setting up a limited company, you register through Companies House. This costs twelve pounds online and takes about twenty-four hours. Companies House will automatically notify HMRC, who will then send you a letter about corporation tax.

CIS Registration

If you will be working as a subcontractor for other construction businesses, you should also register for the Construction Industry Scheme (CIS). Without CIS registration, contractors are required to deduct thirty per cent tax from your payments. With registration, the deduction drops to twenty per cent. Once you have a track record, you can apply for gross payment status and receive your full payment without deductions. We explain this fully in our CIS scheme guide.

Step 3: Get Your Insurance in Order

Insurance is not optional when you are running a trade business. At minimum, you need public liability insurance. This covers you if your work causes damage to a customer's property or if someone is injured because of something you did or failed to do. Most customers and certainly all commercial clients will ask to see your insurance certificate before you start work.

Essential Insurance Policies

Public liability insurance is your most important policy. Cover of one to five million pounds is standard, and it typically costs between one hundred fifty and four hundred pounds per year depending on your trade and turnover. Some trades like roofers and gas engineers pay more due to higher risk.

Employers' liability insurance is a legal requirement if you employ anyone, even on a casual or temporary basis. The minimum cover is five million pounds, and failing to have it can result in a fine of up to two thousand five hundred pounds per day.

Professional indemnity insurance covers you if a customer claims your professional advice or design was faulty. This is particularly important for trades that involve design work, such as kitchen fitting or bathroom planning.

Tool insurance covers your tools against theft, loss, and damage — both in your van and on site. Given that a full tool kit can be worth thousands of pounds, this is well worth the relatively modest premium.

Van insurance must be commercial vehicle insurance, not personal. If you use your van for work and only have personal insurance, any claim will be rejected. Commercial van insurance typically costs between eight hundred and two thousand pounds per year depending on your age, location, and claims history.

For a comprehensive breakdown, see our trade business insurance guide.

Step 4: Set Up Your Van

Your van is your mobile workshop, your storage unit, and your daily driver. Getting the right van from the start saves you time, money, and frustration.

Buying Your First Van

For most tradespeople, a medium-sized panel van like a Ford Transit Custom, Vauxhall Vivaro, or VW Transporter is the sweet spot between carrying capacity and manoeuvrability. A good used van with under sixty thousand miles and a full service history will cost between eight thousand and fifteen thousand pounds.

Do not stretch yourself financially on a brand-new van when you are just starting out. A reliable three to five year old van will do the same job. Once your business is established and generating consistent income, you can upgrade.

If you are buying on finance, compare hire purchase and lease options carefully. Hire purchase means you own the van at the end. Leasing keeps monthly costs lower but you never own the vehicle. Both have different tax implications, so speak to your accountant before committing.

Kitting Out Your Van

Invest in proper racking and storage from the start. It might seem like an unnecessary expense, but organised storage saves you time every single day. You will spend less time searching for tools and materials, you will damage fewer items in transit, and you will look more professional when you open the doors on a customer's driveway.

Essential van additions include internal racking, a roof rack or bars for longer materials, a good quality vice or workbench if space allows, adequate lighting, and proper securing points for heavy items. Companies like Bott, Sortimo, and Van Guard offer modular systems you can configure for your specific trade.

Step 5: Invest in the Right Tools

You do not need every tool on day one, but you do need the essentials for your trade, and they need to be good quality. Cheap tools break, slow you down, and give a poor impression to customers.

The Buy-Quality Principle

The old advice holds true: buy the best you can afford for tools you use every day, and save money on tools you use occasionally. A plumber's pipe cutter or an electrician's multimeter gets used daily — invest in quality brands like Knipex, Wera, Fluke, or Milwaukee. A specialist tool you might use twice a year can be a budget option.

Building Your Kit Over Time

Start with the core tools your trade requires and build your kit as you take on different types of work. Keep a list of tools you find yourself hiring or borrowing — once you have hired something three or four times, it is usually cheaper to buy your own.

Power tools are a significant investment. Committing to one battery platform (such as DeWalt, Makita, or Milwaukee) means your batteries and chargers are interchangeable across all your cordless tools, which saves money and space in the long run.

Protecting Your Tools

Tool theft is a real problem for tradespeople in the UK. Invest in good locks for your van — a slamlock that locks automatically every time you close the door, plus a deadlock on the rear doors. Consider a small safe bolted to the van floor for your most valuable items. Mark your tools with your postcode using an engraving pen or UV pen, and photograph everything for your insurance records.

Step 6: Get Your Qualifications and Certifications

The qualifications you need depend entirely on your trade. Some trades are heavily regulated, while others have no formal requirements at all.

Regulated Trades

Gas engineers must be Gas Safe registered. Working on gas appliances without registration is illegal and dangerous. You need relevant ACS qualifications, which are renewed every five years.

Electricians who want to self-certify their work under Part P of the Building Regulations need to be registered with a competent person scheme such as NICEIC, NAPIT, or ELECSA. Without this, all notifiable work must be inspected by building control, which adds cost and delay for your customers.

Unregulated Trades

Trades like plumbing, carpentry, plastering, decorating, landscaping, and general building do not require formal qualifications by law. However, having NVQ Level 2 or 3, City and Guilds certificates, or other recognised qualifications gives customers confidence and can be required for certain contracts, insurance policies, or trade body memberships.

Trade Body Memberships

Joining a trade body or professional association adds credibility to your business. Options include the Federation of Master Builders, the National Federation of Builders, the Chartered Institute of Plumbing and Heating Engineering, or trade-specific bodies. Many of these provide additional benefits like dispute resolution, technical helplines, and marketing support.

Step 7: Set Your Prices

Pricing is one of the biggest challenges for new tradespeople, and getting it wrong can make or break your business in the early months. Too many new starters undercharge because they lack confidence, then burn out working long hours for inadequate pay.

Calculate Your Minimum Rate

Start by working out what you need to earn. Add up your annual personal expenses (mortgage, bills, food, everything), then add your annual business overheads (van, insurance, tools, fuel, phone, accounting). Divide that total by the number of days you can realistically work and bill for in a year — typically around two hundred to two hundred and twenty days once you account for holidays, admin days, quiet periods, and sickness.

That gives you your minimum day rate — the rate below which you are literally losing money. Your actual rate should be above this, because you also need profit margin to grow the business, build savings, and invest in equipment.

For a complete breakdown of pricing methodology, read our detailed guide on how to price a job as a tradesperson.

Research Local Rates

Find out what other tradespeople in your area charge. Ask colleagues, check online directories, look at local Facebook groups. You do not want to be the cheapest — that attracts the worst customers and leaves no room for error. Aim for the middle of the market when you are starting out, and increase your rates as your reputation and reviews grow.

Step 8: Find Your First Customers

This is the part that worries most new tradespeople the most, but finding work is very achievable if you approach it methodically.

Start With Your Network

Tell everyone you know that you have started your own business. Friends, family, former colleagues, neighbours — word of mouth is still the most powerful source of work for tradespeople. People prefer to hire someone they know or someone who was recommended by someone they know.

Online Directories and Lead Platforms

Create profiles on the platforms where homeowners look for tradespeople. Checkatrade, MyBuilder, Bark, and Rated People all generate leads, though the quality and cost varies. Checkatrade tends to carry the most trust with homeowners. For tips on getting set up, see our guide on how to get on Checkatrade.

Google Business Profile

Set up a Google Business Profile immediately. It is free and puts you in front of people searching for your trade in your area. Add photos of your work, respond to all reviews, and keep your information up to date. Over time, this becomes one of your best sources of leads. Our guide on getting more Google reviews covers how to build your review count quickly.

Social Media

A Facebook business page and an Instagram account showing your work are free marketing tools that many tradespeople underuse. Before and after photos, progress videos, and customer testimonials all help build trust with potential customers. You do not need to post every day — a few quality posts per week showing your best work is enough.

For more detailed strategies, read our full guide on how to market your trade business.

Step 9: Quote and Invoice Professionally

First impressions matter, and your quote is often the first piece of communication a potential customer receives from you. A professional, clear, well-structured quote signals that you are organised, reliable, and serious about your work. A vague number on a text message does the opposite.

What a Good Quote Includes

Every quote should include a description of the work you will carry out, an itemised breakdown of costs (or at least a clear total with an explanation of what is included), a timeline for the work, your payment terms, and a validity period. This protects both you and the customer by making sure everyone is on the same page before work starts.

Writing detailed quotes takes time, which is why many tradespeople rush through it or skip the detail. Tools like QuoteSmith solve this problem by generating professional PDF proposals from your basic job details. You enter the line items and costs, and the AI writes the scope of work, timeline, and terms — producing a branded proposal you can send within minutes. It makes you look professional from the very first job.

Invoicing and Getting Paid

Set clear payment terms from the start. For residential work, many tradespeople take a deposit of twenty to thirty per cent before starting, a mid-point payment on larger jobs, and the balance on completion. For commercial work, you may need to work on thirty-day payment terms.

Invoice promptly — the day you finish a job, not a week later. Include your bank details on every invoice, a clear description of the work completed, and the payment due date. For more detail, see our guide on how to invoice as a tradesperson.

Step 10: Keep Your Books in Order

Bookkeeping is not glamorous, but getting it wrong costs you money. At its simplest, you need to record every penny that comes in and every penny that goes out. This is a legal requirement for self-assessment, and it is also essential for understanding whether your business is actually profitable.

Choose Your System

You have three main options for bookkeeping. A spreadsheet works if you are disciplined about updating it regularly. Accounting software like QuickBooks, Xero, or FreeAgent automates much of the process and makes tax returns easier. Or you can hand everything to an accountant and let them deal with it — though you should still keep your receipts organised.

Whichever system you use, the key habits are the same: record income as soon as you receive it, keep every receipt, and separate your business and personal bank accounts. A dedicated business bank account makes everything cleaner and your accountant will thank you for it.

Making Tax Digital

HMRC's Making Tax Digital (MTD) programme is gradually rolling out to all self-employed people. From April 2026, sole traders with income over fifty thousand pounds must keep digital records and submit quarterly updates to HMRC. This will expand to lower income thresholds in subsequent years. If you are not already using accounting software, now is the time to start.

Allowable Expenses

Make sure you claim every legitimate business expense to reduce your tax bill. Common allowable expenses for tradespeople include tools and equipment, van costs (fuel, insurance, maintenance, finance), materials, workwear and PPE, phone bills (the business portion), insurance premiums, accounting fees, marketing costs, training and course fees, trade body memberships, and a proportion of home office costs if you use part of your home for business administration.

For a complete guide to managing your tax obligations, read our self-assessment tax guide for tradespeople.

Step 11: Plan for Growth

Once you have a steady flow of work, you can start thinking about growing your business. This might mean taking on an apprentice or labourer, investing in marketing to increase your reach, moving into higher-value work, or specialising in a particular niche.

Growth does not have to mean employing a team of people. Many of the most successful tradespeople in the UK are sole operators who have built a strong reputation, charge premium rates, and earn an excellent living without the stress of managing employees. The key is to be intentional about what you want your business to look like.

For a structured approach to this, our trade business plan template walks you through the process of planning your business's future.

Common Mistakes to Avoid

After speaking to hundreds of tradespeople through QuoteSmith, these are the mistakes we see most often from those starting out.

Undercharging. The biggest one by far. New tradespeople often set their rates too low because they lack confidence or want to undercut competitors. This leads to burnout, resentment, and sometimes financial difficulty. Charge a fair rate from the start.

Not getting insurance. It only takes one accident or one customer dispute to understand why insurance matters. Get it before you do your first job, not after.

Poor record keeping. Shoebox full of receipts is not a system. Set up a proper bookkeeping process from day one and stick to it.

Saying yes to everything. Not every job is worth taking. Learn to recognise problematic customers, jobs that are outside your competence, and work that will not be profitable. It is better to say no to a bad job than to regret taking it.

Neglecting marketing. Many tradespeople rely entirely on word of mouth. While referrals are excellent, you need other channels too — especially in the early months when you have not yet built a large customer base.

Getting Started — Your First Week Checklist

To make this actionable, here is what to do in your first week of going self-employed.

Day one: Register as a sole trader on GOV.UK. Open a business bank account. Register for CIS if applicable.

Day two: Get public liability insurance. Get van insurance if you have not already. Apply for tool insurance.

Day three: Set up your Google Business Profile. Create a Facebook business page. Order business cards or vehicle signage.

Day four: Set your prices using the calculation method above. Create a quote template or sign up for QuoteSmith. Set up your bookkeeping system.

Day five: Tell everyone you know. Message friends, family, former colleagues. Post on social media. Create profiles on Checkatrade, MyBuilder, or your preferred lead platform.

Then get out there and do great work. The rest follows.