The UK Rules
How to Register as a Sole Trader

Setting Up as a Sole Trader in UK

It is a quick and easy process to set up as a sole trader in the United Kingdom. But, you would need to register with HMRC before running a business as a self-employed dealer.

SOLE TRADERS: Running your own business as an individual means you are the sole trader of that enterprise. You would be self-employed, the exclusive owner, and sole proprietor of the business.

There are key differences between a sole trader business and running a limited company. For instance, sole trader advantages and disadvantages mean:

  1. You can keep all business profits (after paying any due taxes).
  2. You must take personal responsibility for any business losses.
  3. You must follow the UK rules on naming and running your business.

An individual sole trader is not the same as a company. It is a single person carrying on a business, very often in their own name.

In fact, registering as a sole trader is the most common method of starting a business in the United Kingdom. Out of all UK businesses, more than 75% register as sole traders.

As a rule, sole trader businesses are customarily used by operations with a low turnover. In most cases, they are low risk ventures run by a single owner.

You need to notify HM Revenue and Customs if you set up as a sole trader. They would need to know if you intend to start working for yourself.

In essence, you would be informing HMRC that you plan on being in 'self employed status'. They would then need to know if the sole trader business will have a 'business name' or a 'trading style'.

Note: A 'sole proprietor' would own the business 100%. They cannot have any partners, and there would be no directors or shareholders. Different rules apply if you are setting up a business partnership.

Registering as a Sole Trader

You will need to register for and file your Self Assessment tax return as part of setting up as a sole trader. So, you must register a business as a sole trader (with HMRC) if any of these apply to your situation:

Sole Trader Responsibilities

How to Register a Business as a Sole Trader in the United KingdomBesides that, anyone moving to the United Kingdom to set up a business would need to apply for a National Insurance number.

The obligations and responsibilities of all sole traders include:

Registering for VAT

If the business turnover goes over the current VAT threshold you will also need to register for Value Added Tax.

You can choose to make a voluntary registration. It may suit your trading circumstances if you sell to other VAT-registered businesses. It means you would be able to reclaim the VAT.

Working in the Construction Industry

Many sole traders work in the construction industry as either a contractor or a subcontractor. If this is the case, you would need to register with HM Revenue and Customs for the Construction Industry Scheme (CIS).

Naming the Business

You may be wondering whether a sole trader can have a business name. In fact, you can choose to trade under your own name or under another chosen name for the business. There is no need to register your name (e.g. at Companies House).

But, you must include your name, and the business name if you have one (the trading name) on official company paperwork (e.g. invoices and letters).

Note: What you choose to name the business could be a crucial part of setting up as a sole trader. It is wise to do some research on website design and search engine optimisation if you are including them in your advertising and marketing campaigns.

Sole trader business names must not:

You can stop other people trading under your business name if it is important to your situation. In this case, you would need to follow trade mark rules and apply to register it to stop it happening.

Note: The business trading name must not contain a 'sensitive' word or expression. Likewise, it must not suggest a connection with any government or local authorities (unless you have permission to do so). Further guidance is available about incorporation and names for companies in the United Kingdom.

Extra Help and Support

Anyone working as a sole trader can sign up for HMRC business help and education emails which is a free service tailored to your needs.

How to Register a Business as a Sole Trader in United Kingdom