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Practice No 6009

The Institute of Certified Bookkeepers


Setting up as a self-employed sole trader is a relatively simple and popular way to start your own business.


You can trade under your own name or come up with a suitable business name. If you decide on the latter, you must make sure that your business stationery displays your own name as well as the trading name of the business.


This may be stating the obvious, but your trading name:




Possible needless expense here! Make sure you register as self-employed with HMRC as soon as you start up in business on your own. If you don’t do this within the first three full months of becoming self-employed, you may be liable for a penalty of £100. When you register, you will receive your 10 digit Unique Tax Reference (UTR), keep this along with your National Insurance Number safe and to hand; you will find that a lot of people ask for them!


As a sole trader, you will be liable for income tax and (in most cases) Class II and IV National Insurance (NIC) on any profits your business makes. You will need to complete a self-assessment tax return each year.


If your business has (or you expect it to have) a turnover of more than £85,000 a year (for 2018/19 and frozen for a couple of years), be aware, it's calculated on a rolling basis. You'll need to monitor your taxable turnover for a rolling 12 month period, not just in the current tax year, your last financial year or the calendar year. If any of these do apply, you need to register for VAT show your VAT number on your invoices, charge your customers VAT, complete VAT returns and send VAT payments to HMRC.


Sole traders can take on employees just like any other business. But If you do, you will need to register as an Employer with HMRC, deduct and collect Tax and NIC. In addition you will likely need to set up and contribute to an Auto Enrolment (AE) Pension scheme for your Employees.




Keep all the financial records you will need to fill in your tax returns. Keep all your receipts and transaction records in a safe place and in date order. The more organised you are with your paperwork from day one, the easier it will be to compile your return when the time comes.



Certain types of work may need a licence or permission from your local authority, for example restaurants, childminders, cab drivers and street traders; these all need to have a local authority licence. In addition, your qualifications and business premises may be inspected beforehand to ensure you comply with certain regulations.


Special tax rules apply to subcontractors in the construction industry. Sub-Contractors will need to register for the Construction Industry Scheme (CIS) and then quote their NIC and UTR when taking on sub-contracting work.

  • Should not be the same as, or too similar to, that of a business that already exists.

  • Should not contain words that people might find offensive or misleading.

  • Should not suggest a connection with government or local authorities.

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