Sole traders

A straightforward approach to business

Being a sole trader is the simplest way to run a business: it does not involve paying any registration fees, keeping records and accounts is straightforward, and you get to keep all the profits. However, you are personally liable for any debts that your business runs up, which can make this a risky option for businesses that need a lot of investment. You also need to register as self-employed.
You make all the decisions on how to manage your business.

You raise money for the business out of your own assets and/or with loans from banks or other lenders.
You have to make an annual self assessment tax return to HM Revenue & Customs.

You must also keep records showing your business income and expenses.

As you are self-employed, your profits are taxed as income.

You also need to pay fixed-rate Class 2 and 4 National Insurance contributions on your profits.

As a sole trader, you are personally responsible for any debts run up by your business. This means your home or other assets may be at risk if your business runs into trouble.

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