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 & 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 2012 to 2013, you must register before 5 October 2013.
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 £79,000 a year.