Can sole traders employ staff?

What is a sole trader?

A sole trader runs their business as an individual, unlike a limited company contractor, who is seen as being completely separate from their business.

They will register as self-employed with HMRC and then at the end of each tax year report their income, expenses and tax liabilities via a self-assessment tax return.

Visit our How to Set up as a Sole Trader page for further advice and guidance.

Sole trader responsibilities include:

• Keeping business records and proof of expenses.
• Filing a self-assessment tax return.
• Paying tax/National Insurance.
• Registering for VAT (if earning over a certain amount) – for more information on this, take a look at our Sole Traders and VAT page.

Can sole traders employ staff?

A sole trader may find themselves in a situation where they have additional work that they can’t complete on their own.

If so, they are allowed to hire workers to help them out.

You may presume that if you’re a sole trader needing to employ staff, you’ll have to register as a limited company contractor – this isn’t the case, but, you will need to follow a few rules.

First of all, you’ll need to register as an employer with HMRC – this needs to be completed before the worker’s first payday, but can’t be done more than a month before you start paying them.

Once you’ve registered, HMRC will send an Employer PAYE Reference Number (ERN), which you’ll need for your end of year PAYE return.

You’ll also need to consider:

• How much you’ll be paying workers and ensuring you’re adhering to rules, such as paying at least the National Minimum Wage.
• Ensuring your workers are legally able to work in the UK and checking whether or not you need to carry out a DBS check (if you work in security or with vulnerable people for example).
• Taking out employment insurance – this is a legal requirement if hiring workers. Take a look at our What Type of Business Insurance Do I Need? page for more information on Employers’ Liability Insurance.
• Checking if you need to automatically enrol your employees into a workplace pension scheme.
• Hiring an accountant (if you don’t already have one) to help you with things like payroll, organising a pension scheme and getting help and advice on anything else related to employing staff and running a business.

Our Choosing a Contractor Accountant page will give you guidance on how to go about finding a good accountant.

We hope that you have found this page helpful and it has answered some of your questions about hiring as a sole trader.

If you’d like to sign up or need any further information, please give us a call on 01442 795 100 or you can email sophie.lewis@dolanaccountancy.com. There’s also the option to contact us via live chat.