SOLE TRADERS

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A Sole Trader is an individual that owns and runs a business. A Sole Trader is fully liable for any debts and contracts the business has and from a legal point of view there is no difference between the business and the individual.

Many people often start trading as a Sole Trader because it is the simplest way to begin and trade, then progress to operating through a limited company later on when the business starts to make reasonable profits.

Get in contact today if you are looking for a Sole Trader Accountant to help with your Sole Trader Accounting.

Your Obligations as Sole Trader

If you’re working on as a self-employed basis you must inform HMRC(external link) of your set up within three months, as you will then be responsible for completing a Self-Assessment tax return each year and paying National Insurance contributions and income tax on the profit you make. If you are starting a limited company you must also register with Companies House.

You may also want to consider purchasing business insurance to protect you from the common risks that come with self-employment, as well as risks associated with your industry.

You are not legally required to have insurances to cover your business and personal riskby businesses in the UK. However, if you hire one or more employees you are obliged to have employers’ liability insurance to cover claims from employees of illness or injury caused by their work.

Start as a Sole Trader

If you’re wondering how to set up as a sole trader, the good news is that it’s very straightforward.

Whether you’re running with one of your online business ideas or opening a brick-and-mortar store, becoming a sole trader simply involves registering for Self Assessment with HMRC. This process makes you officially self-employed as a sole trader in the eyes of the government.

To start, visit the HMRC website and follow the instructions to register for Self Assessment.

You’ll need to provide some basic information about yourself and your business. You can trade under your own name, but there’s also lots of flexibility when it comes to going with alternative business name ideas – just don’t include offensive words or official terms like “limited” or “plc”.

Once registered, you’ll receive a Unique Taxpayer Reference (UTR), which you’ll use when you file your Self Assessment tax return. Remember, you must register by 5th October in your business’s second tax year to avoid any penalties. Additionally, keep track of all business-related income and expenses from day one, as you’ll need this information for your tax return.

How PRS SMART can assist Sole-Traders

Running a sole trader business can seem straightforward — but tax rules, record-keeping requirements, VAT thresholds, and compliance deadlines can quickly become complex, especially as your business grows. Mistakes or missed deadlines can trigger penalties, unexpected liabilities, or administrative headaches.

At PRS SMART, we offer tailor-made support for sole traders — whether you’re just starting out or scaling up. We can help you:

Navigate HMRC registration smoothly and on time.
Set up bookkeeping and accounting systems that meet compliance and audit readiness.
Manage VAT registration and VAT returns if your turnover crosses the threshold.
Prepare and file accurate Self Assessment returns, optimizing tax efficiency while avoiding penalties.
Provide strategic advice — for example, whether you should remain a sole trader or consider a limited company structure if your business outgrows the sole-trader model.

With our deep expertise, global insight, and commitment to precision and integrity, PRS Smart ensures that you stay compliant, efficient, and focused on growing your business — while leaving all legal and financial compliance to experts.