A sole trader is a self employed individual who runs their own business. Operating as a sole trader is considered by most to be the simplest form a business can take.
The key characteristic of being a sole trader is that the business and the individual operating the business are (from a legal standpoint) viewed as the same person
and this means that any profit made by the business belongs to the individual but likewise so does any debt and any legal responsibilities.
If you decide to operate as a sole trader then you’ll need to keep detailed records of all business income and expenses for at least 5 years following the 31 January submission deadline of the relevant tax year. You can either trade using your own name or you can choose a suitable “trading name” that needs to be displayed on any invoices/receipts along with other business details. There are also certain guidelines
to follow when choosing a name for your new sole trader business.
To register your business as a sole trader the process is relatively simple
, you’ll just need to register for self assessment via the HMRC website and submit an annual tax return detailing any profits or losses your sole trader business makes. There are strict rules
surrounding which expenses are allowable
for a sole trader business so it’s important that you speak to an accountant where necessary as they will help you to operate as efficiently as possible and ensure you avoid incurring any penalties from HMRC. They will also be able to answer any questions you have about setting up as a sole trader or limited company.