SiteIt's Sunday night at the kitchen table. You've done your first week of direct work, a gearbox change and two nights of cover. The site wants an invoice by Wednesday.
You open a blank template and type "Invoice 001". Then you stop. Whose name goes at the top? Do you need a business name? Should you have registered with somebody first?
Most engineers set up as a sole trader this way, one job in and slightly behind. That's fine. The setting up is the easy part. Where it goes wrong is the records you didn't keep and the first tax bill you didn't plan for.
What a sole trader is
A sole trader is the simplest way to work for yourself. You're self-employed, you make the decisions, and you keep the profit after tax (GOV.UK). You can do it alongside a staff job, too. GOV.UK says you can be employed and self-employed at the same time.
The catch is liability. Sole traders have "unlimited liability", so you're personally responsible for the debts of the business. That's why public liability insurance matters more on your own than it ever did on staff. If you'd rather have a company between you and the risk, a limited company for engineers covers what that costs you in admin.
Register, and do it early
You can start trading straight away without registering. But you must register for Self Assessment if you earn more than £1,000* from self-employment in a tax year (GOV.UK). The deadline to tell HMRC is 5 October* after the tax year ends (GOV.UK).
You can register earlier, and we'd do it the week you send your first invoice. It costs nothing, and you won't be chasing a reference number while a deadline closes in.
The £1,000* is also the trading allowance. It's tax-free, but if you use it you can't claim your expenses as well (GOV.UK). For an engineer buying tools, meters and fuel, claiming real expenses is almost always worth more.
The name on the invoice
You can trade under your own name or pick a trading name (GOV.UK). Most sites don't mind which. What they do mind is when the names don't match.
Use the same name on your invoices, your insurance certificate and your bank account. A site's accounts team that sees three different names will hold the payment while it asks questions. Insurance for contract engineers covers the other checks they'll run. They'll want your tickets too, and which tickets get you contract work covers the ones worth having.
Keep the records from day one
You must keep records of all your sales and income and all your business expenses (GOV.UK). Keep them for at least five years* after the 31 January deadline for that tax year (GOV.UK).
Cash basis is now the default way of keeping accounts. You record income when the money arrives and costs when you pay them (GOV.UK). That suits engineers well. You don't pay tax on an invoice that hasn't been paid yet.
In practice, it looks like this:
- a separate bank account for work, so business and personal money never mix
- a photo of every receipt, the day you get it
- a numbered invoice for every job, with the site, the dates and your hours
- a mileage log if you use your own car or van
Software helps, and soon it won't be optional. Making Tax Digital for Income Tax means digital records and quarterly updates. You'll need it from 6 April 2027* if your income from self-employment and property was over £30,000* in the 2025 to 2026 tax year. From 6 April 2028*, the threshold drops to £20,000* (GOV.UK). Start digital now and you won't have to change later.
Expenses you can and can't claim covers what goes in the costs column.
Plan for the tax bill
HMRC works out your Income Tax and National Insurance from your profits when you send your return (GOV.UK). For 2026 to 2027, Class 4 National Insurance is 6%* on profits between £12,570 and £50,270*, and 2%* above that. If your profits are £7,105* or more, Class 2 is treated as paid, which protects your National Insurance record without a bill (GOV.UK).
The online return and the tax are both due by 31 January* (GOV.UK). In your first year, you'll often pay your first payment on account at the same time, which is half of that year's bill again (GOV.UK). Put money aside from every payment so that date doesn't hurt.
Keep an eye on VAT as you grow. You must register if your taxable turnover for the last 12 months goes over £90,000* (GOV.UK). Full-time contract work at a good rate can get there faster than people expect. VAT registration for engineers covers what happens next.
Our view
Sole trader is the right starting point for most engineers doing breakdowns and cover direct. It's cheap, quick and easy to run. You can move to a limited company later, and GOV.UK says that's usually the easier way round (GOV.UK).
What makes it work is habit. Ten minutes every Friday with the receipts and the invoices saves a lost weekend every January.
What to do on Monday
- Register for Self Assessment now. Don't wait for the October deadline.
- Open a separate bank account for work, and check with your bank which type you can use.
- Choose your invoice name, and make sure your insurance certificate shows the same one.
- Pick record-keeping software that works with Making Tax Digital, and set a Friday reminder to update it.
* The £1,000 registration point and trading allowance, record-keeping period, Making Tax Digital dates and thresholds, National Insurance rates, Self Assessment deadlines and the VAT threshold correct as of 28 September 2026. Check GOV.UK's guide to setting up as a sole trader and Making Tax Digital for Income Tax for the latest.