Set up as a sole trader

You’re self-employed if you run your own business as an individual and work for yourself. This is also known as being a ‘sole trader’.

You can keep all your business’s profits after you’ve paid tax on them. You’re personally responsible for any losses your business makes. You must also follow certain rules on running and naming your business.

When you need to set up as a sole trader

You need to set up as a sole trader if any of the following apply:

  • you earned more than £1,000 from self-employment between 6 April 2023 and 5 April 2024
  • you need to prove you’re self-employed, for example to claim Tax-Free Childcare
  • you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits

How to set up as a sole trader

To set up as a sole trader, you must register for Self Assessment.

If you’ve already registered for Self Assessment for another reason (for example, you have income from a pension or a property), you still need to register for Self Assessment as a sole trader. This will register you for Class 2 National Insurance contributions.

Your responsibilities

You’ll need to:

You’ll need to apply for a National Insurance number if you’re moving to the UK to set up a business.

VAT

You must register for VAT if your turnover is over £90,000. You can register voluntarily if it suits your business, for example if you sell to other VAT-registered businesses and want to reclaim the VAT.

Working in the construction industry

Register with HMRC for the Construction Industry Scheme (CIS) if you’re working in the construction industry as a subcontractor or contractor.

Naming your business

You can trade under your own name, or you can choose another name for your business. You do not need to register your name.

You must include your name and business name (if you have one) on official paperwork, for example invoices and letters.

Choosing your business name

Sole trader names must not:

  • include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’
  • be offensive

You need to get permission if your name contains a ‘sensitive’ word or expression, or suggests a connection with government or local authorities. For example, to use ‘Accredited’ in your business name, you need permission from the Department for Business and Trade (DBT).

Check which words you need permission to use, and who from.

If you choose a name or logo that’s registered as a trade mark or is already being used, the owner could take legal action against you.

If you register a trade mark, it’s easier to stop other businesses using your name or logo.

Help and support

You can sign up for business support emails from HMRC to help you if you’re working for yourself.

Part of Set up a limited company: step by step

  1. Step 1 Check if setting up a limited company is right for you

    1. Check what a private limited company is

    How you set up your business depends on what sort of work you do. It can also affect the way you pay tax and get funding.

    Check if you should set up as one of the following instead:

    1. Get help deciding how to set up your business

  2. Step 2 Choose a name

    1. Check the rules for company names
    2. Check if the name you want is available
    3. Check existing trade marks

  3. Step 3 Choose directors and a company secretary

    You must appoint a director but you do not have to appoint a company secretary.

    1. Find out what directors are responsible for
    2. Check who can be a director or company secretary

  4. Step 4 Decide who the shareholders or guarantors are

    You need at least one shareholder or guarantor, who can be a director.

    1. Check if you’ll need to issue shares or set a 'guaranteed amount'
    2. Find out how dividends from shares are taxed

  5. and Identify people with significant control (PSC) over your company

    For example, anyone with voting rights or more than 25% of the shares.

    1. Find out what counts as a PSC

  6. Step 5 Prepare documents agreeing how to run your company

    You need to prepare a 'memorandum of association' and 'articles of association'.

    1. Find out how to create a memorandum and articles of association

  7. Step 6 Check what records you'll need to keep

    1. Check the company and accounting records you must keep

  8. Step 7 Register your company

    You'll need to register an official address and choose a SIC code - this identifies what your company does.

    1. Check the rules for company addresses
    2. Check what your SIC code is
    3. Register your company with Companies House

    Most people can register for Corporation Tax at the same time as registering with Companies House.

    If you cannot, register separately with HM Revenue and Customs (HMRC) after you’ve registered your company with Companies House.

    1. Register with HMRC for Corporation Tax

Also part of