How to set up as a Sole Trader

(2 minutes to read)

There are a few different routes you can take when it comes to joining the self-employed sector – here we take a look at how to set up as a sole trader.

What is a sole trader?

As a sole trader, you are self-employed and run your own business as an individual, keeping all your profits after tax.

In comparison to contracting through a limited company where you would be seen as a completely separate entity to your company, as a sole trader you will be personally liable for any losses incurred.

How do I set up as a sole trader?

You will need to set up as a sole trader if you have been carrying out self-employed work and have earned more than £1,000 in the tax year (6th April-5th April).

You will need to let HMRC know that you are self-employed, which is a simple process that can be completed online.

After you have registered, you will be given a Unique Taxpayer Reference (UTR) – a 10-digit number that you will need in order to file your annual self-assessment tax return.

Can I create a name for my business?

As a sole trader, you are able to either trade under your own name, or you can choose a different business name.

You’ll just need to ensure that your business name isn’t the same as an existing trade mark, isn’t offensive and does not include the following: limited, Ltd, limited liability partnership, LLP, public limited company or plc.

What responsibilities do I have as a sole trader?

Here’s a general idea of your obligations as a sole trader:

  • Keep business records and proof of expenses – you’ll need to choose a method that works for you, whether this is traditional or cash basis accounting.
  • File your self-assessment – the business and expenses records are needed to file your tax return accurately. A self-assessment tax return will need to be completed on an annual basis with all owed tax paid by the 31st of January. Read our What is a Self Assessment Tax Return? page for more information.There’s also ‘Payments on Account’ to consider – these are basically advance payments towards your next tax bill, due on the 31st of January (on top of your tax return) and the 31st of July.

    You won’t need to pay these if your last tax bill was less than £1,000, or if you’ve already paid 80% of all the tax you owe.

  • Pay Class 2 and Class 4 National Insurance – you’ll pay for Class 2 if your profits are £6,725 or more a year, and Class 4 if your profits are £9,881 or more a year. This can be paid through your self-assessment.
  • Register for VAT – you may need to register for VAT, but you’ll only need to do this if your turnover is over £85,000.

At Dolan, we provide accountancy services for sole traders, freelancers and SMEs, so if you need any help we can offer advice on tax issues, give guidance on National Insurance Contributions and complete your self-assessment tax return, plus so much more.

Read our Services for freelancers, sole traders and the self-employed page for more information on the services we provide.

If you’d like to sign up or need any further information, please call one our friendly experts on 01442 795 100 or email Sophie at sophie.lewis@dolanaccountancy.com.

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Why Dolan Accountancy?

Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £95 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of Contractor Umbrella – With changes in Public Sector IR35 Legislation we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.
  • Same day payments- We offer same day payments as standard providing funds are received into our account by 9am, for no additional fee.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

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