What is a Sole Trader?

One of the first questions you need to ask yourself when starting your own business is how you want to run it – what is a sole trader compared to a private or public limited company anyway?

CO-WORKING SPACES

What is a sole trader? It is the simplest business structure in the UK as there is no difference between the person and the company. This means that there is little extra paperwork and regulations, but also that the sole trader is personally liable for any losses in the company.

It’s a good idea to weigh up early on whether you’d be better off setting up as a sole trader or if your business will benefit from being a limited company.

 

How to register sole trader name with Companies House

Sole traders do not need to be registered with Companies House. To register as a sole trader, you’ll need to:

  1. Keep records of your business sales and expenses
  2. Submit a self-assessment tax return every year
  3. Pay income tax on your profits
  4. You must have a national insurance number

 

Benefits of being a sole trader

You might be wondering how to register as a sole trader, and here is the good news: you just need to  so that they can list you for Self-Assessment and you are ready to go.

This means that there’s less paperwork to think about when you’re becoming a sole trader than there would be when you set up a limited company.

Because a sole trader and their business is one and there are no partners or investors, you have higher control to make your business decisions more confidently and quickly. You can also choose exactly where you want the business to go into the future. However, you can also be the only owner of a limited company, which gives you the same control as sole trading.

As a sole trader, you get to keep all profits after tax. You could channel some back into the business, but equally, you could choose to take it home. This is not very tax efficient though, as you’ll have to pay tax in all your profits even if they are reinvested in the business.

You can make your customer service and business more personal being a sole trader, as you don’t need to rely on others to keep your customers happy.

 

Being a sole trader and the challenges ahead

Let’s review what is a sole trader: it is a business structure where there is no separation between you as a person and you as a business. What this means is that if your business hits hard times, you will too. You’ll be liable for 100% of the debt of your business and, if your business fails, you could also lose your personal assets. This isn’t an issue with a limited company  – still easy to set up but with your personal risk limited to your investment in the company.

You may also find that the challenges faced every day by new business owners may be better shared. As a sole trader, you’re responsible for the good times and the bad, and you’ll need to put the hours in to make sure your business works.

As a sole trader, you may also find you put in longer hours or that you just can’t switch off from work. Plus, if you’re off sick or you’d like to go on holiday your business will need to go on hold while you’re off too.

 

Regulations – what does a sole trader need to do?

You don’t need to register as a sole trader, just let HMRC know you are planning to start trading and you are good to go, but you do still need to keep records of your business finances, including income, expenses and profits.

When it comes to tax you’ll need to register with the HMRC and pay National Insurance contributions (NICs) and income tax. These will be checked via your Self Assessment tax return each year. It is recommended to set up a different bank account to keep your personal and professional finances separately.

Register your own business from £9.99

Our simple process

find a name searchbar icon

Find a name for
your company

arrow right
arrow right
bundles icon

Choose the bundle that's right for you

arrow right
arrow right
purchase bundle icon

Purchase your
bundle online

arrow right
arrow right
we will do the rest icon

Fill in a few details and we'll do the rest

Customer reviews

A trusted provider for all businesses

feefo logo
yellow star rating

Rated 4.7 out of 5

Trustpilot logo
green star rating

Rated 4.6 out of 5

google logo
yellow star rating

Rated 4.2 out of 5

Formation bundles to suit all businesses

E-Formation


£9.99

INCL. VAT

ONE OFF



NOW 25% OFF

Essentials

£19.99

£14.99

+VAT

ONE OFF

RRP £56, SAVE 73%

Entrepreneur


£59.99

+VAT

ONE OFF

RRP £115, SAVE 48%

Super


£99.99

+VAT

ONE OFF

RRP £295, SAVE 66%

Pro


£149.99

+VAT

PER YEAR

RRP £1000, SAVE 85%

Limited company

TFC support agent

TFC Hub access

Business phone number

Business bank account

Tax and accounting

Digital docs

Limited company

TFC support agent

TFC Hub access

Business phone number

Business bank account

Tax and accounting

Digital docs

Printed docs

Limited company

TFC support agent

TFC Hub access

Business phone number

Business bank account

Tax and accounting

Digital docs

Printed & bound docs

Registered agent

Limited company

TFC support agent

TFC Hub access

Business phone number

Business bank account

Tax and accounting

Digital docs

Printed & bound docs

Registered agent

Confirmation statement

Limited company

TFC support agent

TFC Hub access

Business phone number

Business bank account

Tax and accounting

Digital docs

Printed & bound docs

Registered agent

Confirmation statement

Dissolution service

Company filling edits

Dormant returns

Legal and finance

Upgrade for support and peace of mind

Get up and running with everything you need to start and run your business. Subscribe and let us take care of your on-going filing requirements.

Starter

£29.99

+VAT

PER YEAR

RRP £220, SAVE 86%

Limited company

TFC support agent

TFC hub access

Business phone number

Business bank account

Tax and accounting

Digital docs

Confirmation statement

Dissolution Service

Company Filling Edits

Dormant Returns

Continue with one-time purchase

Upgrade for support and peace of mind

Get up and running with everything you need to start and run your business. Subscribe and let us take care of your on-going filing requirements.

Starter

£29.99

+VAT

PER YEAR

RRP £220, SAVE 86%

Limited company

TFC support agent

TFC hub access

Business phone number

Business bank account

Tax and accounting

Digital docs

Confirmation statement

Dissolution Service

Company Filling Edits

Dormant Returns

Continue with one-time purchase

Tax and accounting

Get access to Crunch bookkeeping software for free as well as exclusive discounts with other market leading software providers.

Registered agent

Included with this bundle

A 3 in 1 service that protects your privacy, all other directors privacy and includes our mail forwarding service.

Registered office address:

On the public register, use our address as the business’s registered office address

Service address:

On the public register, use our address as all the directors service address

Mail forwarding:

Quick and efficient mail forwarding and junk mail filtering. No additional handling or postage fees.

Registered agent

Free for 3 months with this bundle

A 3 in 1 service that protects your privacy, all other directors privacy and includes our mail forwarding service.

Registered office address:

On the public register, use our address as the business’s registered office address

Service address:

On the public register, use our address as all the directors service address

Mail forwarding:

Quick and efficient mail forwarding and junk mail filtering. No additional handling or postage fees.

Registered agent

Free for 12 months with this bundle

A 3 in 1 service that protects your privacy, all other directors privacy and includes our mail forwarding service.

Registered office address:

On the public register, use our address as the business’s registered office address

Service address:

On the public register, use our address as all the directors service address

Mail forwarding:

Quick and efficient mail forwarding and junk mail filtering. No additional handling or postage fees.

Knowledge hub

rectangle-copy-6@2x

The Formations Company and Companies House

Learn more

rectangle-copy-6@2x

What is a Private Limited Company?

Learn more

rectangle-copy-6@2x

How long does it take to register a new company?

Learn more

rectangle-copy-6@2x

When should I change from sole trader to limited company?

Learn more

rectangle-copy-6@2x

Limited Company Vs Sole Trader: Advantages and Disadvantages

Learn more

rectangle-copy-6@2x

Setting up a limited company for contracting

Learn more