Sole trader is the legal term for self-employed people in the UK.
If you’re a sole trader, you need to do a few things:
- register as a sole trader with HMRC before October 5th (you’ll also get your UTR number then)
- keep a separate business bank account (although it’s not illegal to use your personal bank account, either – but it will make it more difficult for you to do your taxes)
- record your income and expenses (a spreadsheet is sufficient)
- submit a Self Assessment tax return every year with HMRC before January 31st
- you might also have to pay your tax bill using Payment on Account. First time might be a bit of a shock – you’ll have to pay an extra 50% of your tax bill. It’s okay, though, it’s just an advance payment, and you can reduce it or get a refund.
Also, while technically you might work “for yourself”, HMRC will not consider limited company directors to be “self-employed”.
A limited company is a separate entity from you. When you’re a sole trader, your business and you are one – sometimes that might mean you’re taking a risk (you can get personally sued by a client, for example), but it’s much easier and cheaper to do your taxes. Plus you can always purchase inexpensive sole trader professional liability insurance.
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