Sole Trader

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A sole trader is the easiest structure to use to start a business.

That said, it’s certainly not risk free!

The key feature of this trading style is that there is no limit at all to the liability you may face. Creditors can come after you as an individual for any debts incurred by your business, and you will suffer any losses made too.

The profits you make as a sole trader are included in your Self Assessment Tax return, which must be submitted by the 31st January each year.

There are a few hurdles you must cross as you set up your business, as follows:

  • Register for Self Assessment with HMRC as soon as possible. The deadline to do so is the 5th October in your second year of business to avoid penalties.
  • Register to pay National Insurance and register for VAT if you expect to exceed the current registration limits. These change annually so please check the current levels.
  • Set up a separate bank account for use for your business, even if you are trading in your own name. This keeps your business income separate from your personal affairs, which keeps things far easier from an administrative (and HMRC) perspective.
  • Check whether you need office insurance or indemnity insurance, and whether your car insurance will cover you for business use.
  • Speak to a solicitor for Terms and Conditions that will outline the way in which you will work with your customers. This will be a fee that you’ll want to avoid, but it will prove its worth when you have the first customer who chooses not to pay!
  • If you have a website and will be processing customer data, make sure you include a Privacy Policy to adhere to GDPR.

If you are just setting up your Sole Trade, please ensure you seek advice to ensure you are considering all that you should. There may be requirements or considerations in your industry that we haven’t detailed above.

Many of the business development, management or software posts across the Information Centre will be relevant to you as a Sole Trader, so do take a look at the other sections while you are here.

Image of building blocks as featured image for Blog Post 'Which Business Structure is right for you?'

Which Business Structure is right for you?

There are four primary options for a business structure in the UK, but it’s essential that you consider carefully which is best for you BEFORE you start trading. Each has its own set of advantages and disadvantages. In this post we’ll lay out the key differences.

Will your Year End need to change?

As part of the recent Budget announcements, it was confirmed that all self-employed individuals and partners will switch from current year basis to tax year basis from 6th April 2024.

Making Tax Digital for Income Tax (MTD ITSA) delayed

The implementation of MTD for ITSA, for landlords and self employed tax payers will be delayed by two years. It will not come into force until April 2026, and when it does, it will have an increased threshold.

Why should I have a Will?

No-one likes to think about death, but there are good reasons for doing so! There are also good reasons to make sure you have a Will, and that it’s up to date.

How long must I keep my records for?

Whether you’re a large business, a small business or a taxpayer with a small tax return, there are rules around how long you must keep your records. Are you unsure how long you must keep them, and in what format?

What can you claim if you’re investing in your business?

When you’re investing in your business, it’s not a decision that you take lightly, and it’s one that can make a major difference to your profits and your tax liability.

It’s important that any resulting tax relief claim is considered carefully…

Key Tax Dates for Businesses

The tax year constantly repeats, so there are some key tax dates for businesses that you need to be aware of every year.

Missing them can prove costly, so we’d advise getting them into your diary, and carrying them forward from year to year.

How much is my business worth?

This is a question we’re asked quite a lot! The truth is, a business value will depend on a range of factors and any valuation is only ever a guide for planning purposes.

Valuing a business is a complex business…

Red flags that can trigger unwanted HMRC interest

An HMRC Investigation is not something you’d ever want to go through. It can be a very stressful time…

Related News Items

Why not take a look at these sections too, as there is some overlap between our categories and we’d hate you to miss out!

Why not take a look at these sections too, as there is some overlap between our categories and we’d hate you to miss out!


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I could not speak more highly of Liz and Chris at Baranov Associates.

They are not only incredibly efficient with all things tax related for me but they were also patient and clear with their tutorials on Xero, going above and beyond to make sure everything was working properly for me.

I’m a huge fan of them in general.

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