Being classed as a sole trader means you are working for yourself and self-employed. You will need to inform HM Revenue and Customs and follow the rules for running a business.
SELF EMPLOYMENT: Many different factors make you self-employed when you work for yourself.
You need to understand what counts as trading and what you have to do. One of the first things you must do is register for Self Assessment.
At this point you might be asking yourself 'why should I go self-employed'? People have different reasons to start working for themselves for the first time.
For some, the best part is you get to 'be your own boss'. In most cases that means you can be more flexible when and how you work.
Whereas others see setting up a business as an opportunity to command a higher salary. Of course that often depends on what type of industry you start working in.
There are downsides to working for yourself too. But this guide will help those who are 'going it alone' follow the rules of self-employment.
Those who are going self-employed have several important things to do. The first step is informing HMRC that you are self-employed for your tax obligations.
The next step is choosing a business structure. This will have an impact on your paperwork responsibilities and business insurance.
As a rule you are going self-employed and working for yourself if you:
Note: Most of these situations also apply to those who own a limited company. This includes those where HMRC do not class you as self-employed. In this case you would be an owner and an employee of your company.
In some cases you can be both self-employed and employed at the same time. An example is working for an employer in the day time and running your own business afterwards.
If you are selling goods or services you could get classed as a trader. In this case: If you are trading, you are self-employed. As a rule you will be trading if you:
As a rule, selling a few unwanted items occasionally, and not planning to make a profit, means you are not trading. But, you cannot use losses from a hobby to reduce your tax bill.
Note: HMRC website has a facility for checking your employment status for tax purposes.
Note: You must also follow all the rules for running, and naming, your business.
Several other business structures are different than being a sole trader, such as:
Where can you get further help growing your business? The government website has a business support helpline page. Some startups can get funding by through The Prince's Trust Enterprise Program.
A guide to Working for Yourself in Self-employment