Many businesses start with just one person, known as a ‘sole trader’. If you set up as a sole trader you’ll be self-employed, which means you’ll be your own boss.
As a sole trader you will:
- manage your own time.
- take responsibility for your company’s administration and accounts.
- risk your own money, particularly if you’re leaving full-time employment.
- keep all your business profits after tax and national insurance.
- take personal responsibility for any losses your business makes.
You can employ staff. ‘Sole Trader’ means you’re responsible for the business, not that you have to work alone.
Naming your business
You can use your own name or trade under a business name.
You must include your own name and business name (if you have one) on any official paperwork, like invoices and letters.
As a Sole Trader you must:
- register with HM Revenue and Customs (HMRC) and follow certain rules on running and naming your business.
- keep records of your business’ sales and expenses.
- fill in a Self Assessment tax return every year.
- pay Income Tax on the profits your business makes.
- pay National Insurance.
- register for VAT if you expect your takings to be more than £82,000 a year.
- register with the Construction Industry Scheme (CIS) if you’re a contractor or sub-contractor in the construction industry.
Below is a video explaining the tax implications of working on your own.
Registering your business
Tell HM Revenue and Customs (HMRC) you want to be a sole trader by registering as a new business. You’ll register for Self Assessment tax returns and Class 2 National Insurance at the same time.
You’ll then be able to report your self-employment income through a tax return after the end of each tax year.
Allow 10 working days to complete the registration process because HMRC needs to post you an activation code. You’ll be prompted for this when you first log in to your online account (also known as a Government Gateway account).
Below is video explaining the records you need to keep as a self-employed person.
Growth Hub providers – help with being a sole trader.
Gov.uk- details of how to register as a sole trader.\
Gov.uk - register for VAT
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