How to register as a sole trader

How to Register as a Sole Trader

Anyone seeking self-employment and the autonomy to manage their business independently can register as a sole trader. 

Whether you’re involved in selling products or delivering services, once you’ve defined your entrepreneurial direction, you can readily follow it. The UK has about 60% sole traders as their business structure, which amounts to approximately 3.4 million sole traders. Let us first define what a sole trader is. before we discuss the intricate details of the registration process for sole traders. 


Sole trader and its responsibilities: 

A sole trader is an individual who is self-employed and possesses both the company and its business. 

As a sole trader, you lack a separate legal identity; you are viewed as a single entity. Consequently, any business losses or successes directly affect your personal finances, and likewise, business profits are your profits. 

This also entails that if your business encounters any legal challenges, they are directly tied to you as an individual. As a Sole Trader, you are truly responsible for keeping all the necessary records in line along with managing the business’s success. You will take care of the business operations as well. If not all, the majority of the tasks and operations are your responsibility. 


Steps for Setting up as a Sole Trader: 

In order to set up as a sole trader, you need to follow some simple steps and consider it done. It is so easy in the UK to become a sole trader.  For Example, Catering business, tutoring services, or offering services of Accountancy. If you are currently doing any current business, you would realise that you are falling under the sole trader category. Let us have a brief overview of the steps to register as a sole trader in the UK. 


Step 1: Select a name for your business: 

The first step is to choose a good and relevant trading name for your business. It is not compulsory to use your name as a trading name. You must use a name that describes your services and products. By choosing a relevant name, your customers will relate more to your business, and it will be easy to remember. A well-researched name gives a purpose to your business. Once you have finalized your name, register a domain name for yourself. This is crucial because it will assist you in making your brand presence in the online market. Atheist, a website, and a few social media pages of your brand are essential nowadays. Double-check the trading name; if it isn’t your original name, it can be a trademark. You must register your trading name as a trademark so others can’t use it in the future, and your business identity is restricted to only you. 


Step 2: Register As a sole trader: 

The registration covers the National Assurance and Self-Assessment. The procedure is quick and easy by filling out the online application. After that, HMRC will send you a unique taxpayer reference. 

HMRC Government Gateway is the most straightforward method of registering as a sole trader. Fill in the registration form and register as a sole trader using your ID and password for HMRC Government Gateway. If you do not have an account, sign up and log in. You can also register as a sole trader by completing the HMRC form and registering if you are a self-employed sole trader. Print the HMRC form and post it. 

To complete the registration process, you’ll need essential information, including your National Insurance Number, the nature of your business, its name, and the start date. Among these, the National Insurance Number is the most crucial requirement. 

Once you have filled in all the necessary details, HMRC will send you a unique 10-digit reference Taxpayer (UTR) along with an activation code for online access. This online account will also be used for your Self-Assessment Income tax return. 

In your Self-Assessment tax return, NIC will also calculated and paid. NIC stands for National Insurance Contribution, and it is payable if your annual profits exceed £12,570. You will classified in the Pay Class 2 and Class 4 rates. 


Step 3: VAT Registered Business 

Register for VAT if you anticipate that your annual taxable turnover will exceed £85,000. 

You can voluntarily register for VAT. You can reclaim VAT when you sell to another business. To register for VAT, you will need a Government Gateway User ID and its password. You can create your online account by registering online and only do a time Signup if you do not have an already registered account. If you need Guidance on how to create your government gateway account, then click here. 


Step 4: Register as an Employee with HMRC: 

If you have employees working with you in business, you have to register them with HMRC. This is necessary before employing staff or when you are beginning to hire staff. Then, the following things you’ll need: 

  1. Get the (EL) Employer’s liability insurance. 
  2. Get the Pension Schemes for employees who are eligible and contribute towards this process. 
  3. Find yourself a Payroll provider that will collect the National Insurance Contributions (NICS) from your employees, or you can operate a PAYE (Pay as You Earn). In any way, you have to pay these to HMRC. 


Step 5: Permissions and Licenses 

You must need Permits to operate your business. It will be from local or central authorities. You can then use it legally. The type of licenses or permits depends on the nature and location of the business you are doing. 

For instance, licenses are required if you work in markets or trade on the streets. They are also necessary if you sell alcohol or provide services like beauty treatments.  


Step 6: Professionally Required Qualifications 

Check for your industry bodies to meet all the requirements of your business. The Local Chamber of Commerce will be a good source of providing details for the local business groups. 

Checklist for Registering as a sole trader: 

  1. Business name and business plan 
  2. Do Register the Trademark 
  3. Do Register with HMRC 
  4. Register for VAT 
  5. Register as an Employee 
  6. Permission and Licenses 


Other Methods of Registering as a Sole Trader: 

You can register as a sole trader in the UK by the online above method. But there are some other ways of registering as well: 

  1. Make a Call to the HMRC’s Newly Helpline for Self Employed by dialing the number 03002003504 
  2. Filling and Completing the form: CWF1 form 
  3. Get some extra help from the HMRC if you are facing some health issues. You can use the web chat service or contact the HMRC Online service. 


THE UK’S BEST Sole Trader Accountants 

Lanop Business and Tax Advisors offers comprehensive sole trader accountant services. If you are looking for the best accountancy firm that can give consultancy and services from registering as a sole trader to working efficiently as a sole trader. Consider Lanop as your best friend in business. 

Lanop is arguably the UK’s most trusted sole trader accountant with an affordable cost and promise to provide quality work. They also offer the services of VAT Registration and VAT Returns. From Bookkeeping to PAYE & Payroll managing, Compliance and advice on COP 8 and COP 9, and Nudge letters to Disclosure facilities, all done under one umbrella, which is Lanop business and Tax advisor in the UK. 




Is there any cost involved in setting up as a sole trader? 

There are no costs involved. In fact, it’s a 5 to 6-step process in the UK. This has become easier with the use of an official Government gateway account. 


Is it necessary to tell HMRC about your sole proprietorship? 

Yes, your priority is to tell HMRC about your business and register yourself as a sole trader. Otherwise, you’ll get fined. 


Are there any risks involved with sole proprietorship? 

There may be some risks involved in sole proprietorship. Personal liability, limited opportunities for investment, and full responsibility for the success and failure of business. However, sole proprietorship have more advantages than risks. 


What are some of the benefits a sole trader has? 

You can start from a low budget; whether you are selling goods or services, you will have the liberty to register as a sole trader. You will have exclusive control of your business. The main advantage is simple accounting, which eliminates hectic account management. 


How does Lanop Provide Accountancy help to sole traders in the UK? 

Lanop is an accountancy and tax consultancy firm in the UK. They provide top-notch accountancy services in various fields. One of their best services includes providing sole trader accountants who work diligently to reduce stress and make efficient and effective financial decisions.  


Get In Touch

Address: 389 Upper Richmond Rd, London SW15 5QL, United Kingdom.

CEO of Lanop

Aurangzaib Chawla

At Lanop, I am providing my services as the Managing Partner and Tax Specialist. My expertise includes helping medium and small-scale businesses in their accountancy and legal requirements, business start-up support, strategic review, payroll system review and implementation, VAT and tax compliance to cloud accounting. I am also an expert in financial reporting, identifying and monitoring risks, strategic business development, client retention, market acquisition and deals closure by carefully planning my sales cycle. 

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