Sole Trader

A sole trader is the legal term for self-employed individuals in the UK. If you’re a sole trader, you need to do a few things:

• Register as a sole trader with HMRC before October 5th (you’ll also get your UTR number then)
• Keep a separate business bank account (although it’s not illegal to use your personal bank account, either – but it will make it more difficult for you to do your taxes)
• Record your income and expenses (a spreadsheet is sufficient)
• Submit a Self Assessment tax return every year with HMRC before January 31st

You might also have to pay your tax bill using Payment on Account. Doing it for the first time might cause a bit of a shock – you’ll have to pay an extra 50% of your tax bill. It’s OK, though, don’t panic. It’s just an advance payment and you can reduce it or get a refund.

Also, while technically you may “work for yourself”, HMRC will not consider limited company directors to be “self-employed”. A limited company is a separate entity from you. When you’re a sole trader, your business and you are one – sometimes that might mean you’re taking a risk (you can get personally sued by a client, for example), but it’s much easier and cheaper to do your taxes. Plus you can always purchase inexpensive sole trader professional liability insurance.