Ainsworth & Co, Chartered Accountants and Business Advisors.

Sole Trader & Self Employment Guide

A Sole Trader is a person who owns and runs their own business and is sometimes called a Proprietor.


For UK Tax purposes a Sole Trader is classed as Self-Employed and files a tax return by Self Assessment.

For a Sole Trader, there is no legal distinction between the owner of the business and the business itself.

A Sole Trader is not a limited company.

A Sole Trader is not an employee of the business.

Take this link for some considerations when choosing between trading as a Sole Trader or Limited Company.

The Sole Trader is entitled to keep the profits of the business, after paying any tax, but a sole trader has unlimited liability for the debts of the business.


A Sole Trader's responsibilities include:


• Paying the business bills and debts arising from anything in the business
• Keeping records of the business's sales and expenses
• Filing a Self Assessment tax return every year
• Paying Income Tax on the Profits the business
• Paying National Insurance: Class 2 NI and Class 4 NI.


Tax


We can prepare and file your accounts with HMRC

Sole Traders must register with HM Revenue & Customs (HMRC) for Self Assessment.

The potential taxes include:

Income Tax
Class 2 National Insurance
Class 4 National Insurance
VAT
PAYE (If you employ staff)
CIS (Construction Industry)


Staff


A Sole Trader is not an employee of the business.

A Sole Trader can employ staff: ‘Sole Trader’ means that you are responsible for the business, not that you have to work alone.

If you employ staff you will probably need to operate a PAYE scheme, depending on how much you pay your staff.


Business Names


Sole Traders may use their own name, a trading name, or other business name, but are there are some 'do's and don'ts' when choosing a business name. Please refer to the government guidance webpages through the links below.

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


Links to Government and HMRC guidance:


Set up as a sole trader
Choose a legal structure for a new business
First steps to register as self-employed



Sole Traders file tax returns by Self Assessment.
Make sure that you are claiming all expenses you are allowed.