To set up as a sole trader, you need to take the following steps:
- Register as self-employed with HMRC online
- Choose a business name
After you’ve registered as self-employed, you’ll need to fulfill the following responsibilities as a sole trader:
1. Abide by HMRC's record keeping requirements
You need to keep records of:
- Your sales and income
- Your business expenses
- Your personal income
- VAT records, if you've registered for VAT
- PAYE records, if you have employees
You need to keep your records for at least five years.
2. Submit a Self Assessment tax return each year
You''ll need to submit a Self Assessment tax return by 31 January each year.
An accountant like GoForma can help you with completing your Self Assessment tax return. You can learn more about the registration process, deadlines, late filing and payment penalties and Making Tax Digital for Income Tax on our Self Assessment guide.
3. Pay income tax and National Insurance Contributions
You'll need to pay income tax, as well as Class 2 and Class 4 National Insurance contributions.
Download our Ultimate Expenses Guide
Download our Ultimate Expenses Guide
What's Inside:
Get Free Advice from an Accountant
Book a free 30 minute call with an accountant. We'll help walk through setting up your business, switching accountant or any of your tax queries. All our fixed price accounting packages come with a 50% off for 3 months.
Read More Guides below:
Self Employed Registration Guide
- What is a Sole Trader?
- Sole trader advantages
- Sole trader disadvantages
- How to register self employed
- Sole trader responsibilities
- Self employed tax
- Important self employed deadlines
Self employed tax obligations guide
When you're self-employed, you have unique financial obligations-especially when it comes to paying your taxes.
When you work for a larger corporation, or even a relatively small business, your company takes on a large percentage of handling your tax responsibilities for you.
As a freelancer or small business owner, you're on your own. You work as an independent contractor for each of the clients you work for-and they don't take taxes out of your check before they send it to you.
How then should you handle the responsibility of paying your taxes?
This guide will help you get started:
What is a sole trader?
If you're planning to start out on your own, one of the most important decisions you'll need to make is figuring out how you should structure your business.
As a freelancer, contractor or small business owner, there are three main types of legal structures you should consider:
- Sole proprietorship
- Limited company
- Working through an umbrella company
It's a decision that requires careful consideration, and it's important that you seek advice from qualified professionals when you weigh out the pros and cons of each business structure. To begin with, you need to have a good grasp of the basics-and here's where our guide comes into the picture.
How to register self employed with HMRC
From starting your side business to going freelance full-time, becoming self-employed can feel scary and exciting all at once.
Before you jump right in, you need to ensure that you're staying on the right side of the law- and this begins with registering as self-employed with HMRC.
In doing so, you can be sure that you're paying the right amount of income tax and National Insurance Contributions, and thereby avoid paying unnecessary financial penalties.
Ready to get started? We've got all the information you need below:
What is a Sole Trader: Meaning & Definition
7 Characteristics For Defining Sole Traders
7 Advantages of Being a Sole Trader
7 Advantages of Being a Sole Trader
