What ‘sole trader’ means
You’re a sole trader if you’re running your own business as an individual. You can keep all your business’ profits after you’ve paid tax on them.
You can take on staff - ‘sole trader’ means you’re responsible for the business, not that you have to work alone.
You’re personally responsible for:
- any losses your business makes
- bills for things you buy for your business, like stock or equipment
- keeping records of your business’ sales and spending
How to set up as sole trader
You must register with HM Revenue and Customs (HMRC) as soon as you can after starting your business.
If you register later than 5 October in your business’ second tax year, you could be charged a penalty.
If you start up as a sole trader during tax year 2013 to 2014, you must register before 5 October 2014.
Sole traders’ tax responsibilities
- send a Self Assessment tax return every year
- pay Income Tax on the profits your business makes
- pay National Insurance
You must also register for VAT if you expect your business’ takings to be more than £81,000 a year.