How to register as a sole trader

A sole trader is a self-employed individual who runs a business as an individual rather than through a limited company. This means the person is solely responsible for the business, including its finances, assets, and liabilities. As a sole trader, you have full control over your business, including the types of products or services you offer, how you market your business, and how you manage your finances.

To register as a sole trader in the UK, you need to follow these steps:

Step 1: Choose a business name

You can trade under your own name or choose a different name for your business. If you choose a different name, you’ll need to ensure that it’s not already taken and that it’s not too similar to another business name. You should also check if the domain name is available for your business.

Step 2: Register for self-assessment

You must register for self-assessment with HM Revenue & Customs (HMRC). This is so you can pay tax on your business profits and complete an annual tax return. You can register online, by phone, or by post.

Step 3: Register for national insurance

You’ll also need to register for National Insurance with HMRC. This is so you can pay Class 2 National Insurance contributions. You can register for National Insurance at the same time as registering for self-assessment.

Step 4: Set up a business bank account

It’s a good idea to set up a separate bank account for your business transactions is a good idea. This will make it easier to keep track of your finances and ensure you’re meeting your tax obligations.

Step 5: Keep records

As a sole trader, you must keep accurate records of all your business income and expenses. This will make it easier to complete your tax return at the end of the year. You should keep records of invoices, receipts, bank statements, and other relevant documents.

Step 6: Check if you need to register for VAT

If your business has a turnover of £85,000 or more, you must register for Value Added Tax (VAT). If your turnover is below this threshold, you don’t need to register for VAT, but you may choose to do so voluntarily.

Step 7: Consider getting professional advice

Getting professional advice from an accountant or business advisor when setting up as a sole trader is a good idea. They can help you with things like tax planning and bookkeeping to give you guidance and support as your business grows. An accountant can help you keep on top of your finances, ensure that you’re claiming all the tax deductions you’re entitled to, and help you plan for your future.

You can find an accountant through personal recommendations, online directories, or professional organisations such as the Institute of Chartered Accountants in England and Wales (ICAEW) or the Association of Chartered Certified Accountants (ACCA).