Set up as a sole trader

When starting out, many business owners set up as a sole trader. This means you run your own business as an individual and are self-employed.

There’s nothing to stop you changing the business structure in the future but this is one of the easiest and most popular places to start.

You can keep all your business’s profits after you’ve paid tax on them. But you’re personally responsible for any losses your business makes. And 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 in a tax year (6^th April to 5^th April)
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 need to tell HMRC that you pay tax through Self Assessment. You’ll then need to file a tax return every year.

You can Register for Self Assessment using this link.

Your responsibilities

You’ll need to:

keep business records and records of expenses
send a Self Assessment tax return every year
pay Income Tax on your profits and Class 2 and Class 4 National Insurance

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 £85,000. 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 construction industry

If you’re working in the construction industry, as a subcontractor or contractor, you’ll need to register with HMRC for the Construction Industry Scheme (CIS)

Naming your business

You can trade under your own name, or you can choose another name for your business and 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

Your name also cannot contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, unless you get permission.

For example, to use ‘Accredited’ in your business name, you need permission from the Department for Business, Energy and Industrial Strategy (BEIS).

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 have set up as a Sole Trader.

Help with how to Set up as a Sole Trader

Or just email us if you want our:

New Business Start-up Checklist, or;
Business Plan Template, or;
Help with
- Bookkeeping
- Software
- Accounts
- Taxes

Achieving Success with your business

If you’re just starting your new business venture or struggling with the steps to the next level contact us now.

We can help you with this and much more

Get ready for success with Moore Financial Management

We can help you with all of your compliance obligations such as:

Self Assessment Tax
Making Tax Digital
Corporation Tax
Filing Accounts
VAT
Payroll and Pensions

But also the things you really need to increase the chances of your business being a success

Management Accounts
Cashflow Reporting & Forecasting
Budgets
Real Time up to the minute information

These are the things that add value and the information you need in order to make the correct business decisions

If you’re not confident with any of this or don’t have the time, getting a licensed accountant to do it for you can actually save you money. It can free up your valuable time which you can use to concentrate on your business. You can also benefit by knowing it has been done correctly and on time.

Mistakes can be costly.

As can missing deadlines.