Sole Trader

Operating as a Sole Trader is the easiest way to get started in business and the one we’d recommend unless you have a specific requirement for a Limited Company.

1. Choose a name! The easy bit, but make sure it complies with the law and the requirements of any professional bodies. You’ll likely need a website, so make sure your name and the web domain are available and work together.
2. Registration for tax. You’ll need a Government Gateway account, a National Insurance Number (NI), 2 forms of ID and a proof of address. You’ll be given a Unique Taxpayer Reference Number (UTR) and will be sent an activation code in the post. You can then register for self-assessment. You must do this by 5^th October following the end of the tax year. Sooner the better!
3. Other taxes. If you’re employing people, or work in the construction industry, then you’ll need to register for PAYE and CIS too. VAT isn’t usually a problem if you’re just starting, but the threshold is £85,000 turnover if your plans are ambitious.
4. Accounting Rules. You can choose between cash accounting or accruals accounting. Most small businesses stick with the cash basis to keep things simple. You can also choose your accounting period, although it’s easier to keep it in line with the tax year. Your first year accounts may be a little shorter or longer depending on when you start trading.
5. Book-keeping. Your choice, but you have a legal obligation to keep complete records of all your transactions. That’s invoices, credit notes, receipts etc. Excel works well for many people, although cloud based apps such as Xero or QuickBooks are game changers for keeping on top of admin.
6. Bank Accounts. Although you can use your personal account, we wouldn’t recommend it. Keeping things separate makes it easier to manage your business and understand how profitable (hopefully) you are. No need to stick with expensive High Street accounts either; Tide, Revolut, Monzo etc all offer app based accounts that are easy to set up.
7. Getting an Accountant. Whilst not entirely necessary if you’re just staring up, a good local accountant can take a lot of the hassle from you. Think of it as an investment that allows you to do what you’re best at – getting your business up, running, and making money.

In summary, our top tips for Sole Traders

Have a plan

• Always have a business plan.
• Make sure you plan your cashflow forecast for 12 months and if you run out of cash.
• It does not have to be long, just enough to map out your goals and provide a checklist of things to do.
• One secret to establishing and running a successful business is to never stop planning and to keep following and updating your business plan.

Start as a sole trader

• Unless you are going to use an accountant or a tax adviser, it’s the simplest way to trade. You can always convert into a limited company or a partnership at a later date.

Choose your trading or business name with carefully

• Choose a name that will give you an original internet domain and social media account. Double-check by making a comprehensive search of your intended name before you buy domains etc and register for tax.

Accounting and tax software

• Do some careful research before you buy. Some packages are very complicated and not ideal if you have no bookkeeping experience.
• Consider outsourcing your accounting and tax work: it might be cost-effective.