How To Register As A Sole Trader


The paradox of registering as a sole trader in the UK is that there isn't a public register of sole traders.

As a private person you can sell goods or services to other people immediately. You don't need to be listed anywhere.

What you do need is to inform HMRC (the UK tax collector) that you are now self-employed. They will send you a UTR number, as part of the reference number on every letter they subsequently send you by post.

→ Find out more about UTR numbers

You then have to submit annual financial returns to HMRC, before 31st January, every year. You can submit these online, after you set up login access at HMRC, using your UTR number.

There is no public list of sole traders and anyone who demands payment to join one is a scammer.

While it is possible to cheat the taxman, and maybe for a long time, tax evasion can have serious consequences.
It is also an unnecessary worry that your mini-empire can come crashing down at any time. Serious fraudsters can do jail time.

A healthy business employs an honest but clever accountant who knows what you can legally avoid in taxation, leaving you to get on with the fun part of your business; making a fat net profit.

HMRC will not tell your currently employer you are also going into self-employment, so don't worry about that. It is free to register. They send you a Government Gateway code in the post and you should allow 30 days for that to happen. Then they send you a letter with your UTR number on it.

How does a sole trader trade?

Like this: Jimmy Harbringer t/a FancyPeanuts (t/a = 'trading as').

That's what Jimmy puts on his contracts and the footer of his website.

- Jimmy cannot pretend he is a limited company i.e. used 'Ltd' in his business name;

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- Jimmy is personally liable for any debts his business incurs;

- Jimmy can put 'FancyPeanuts' by itself all over his website and promotional materials;

- 'Jimmy Harbringer t/a FancyPeanuts' can employ other people; that is the legal business name;

- Cheques payable to 'FancyPeanuts' can be banked if Jimmy has set up a bank account for 'Jimmy Harbringer t/a FancyPeanuts';

- Jimmy should probably get some kind of liability insurance if his business is such that someone might sue him over something he did or did not do in the course of it.

This is what pushes many people over to setting up a limited company. They don't like the idea of being sued by a vexatious litigant over something trivial. Or even something serious!

Your trading name should be something not in use by other business near you and should not be a registered brand name of a famous company, for obvious reasons. Don't try to be clever and insinuate that you are related to a big brand or an existing local company. That can bring unnecessary trouble.

That said, there's nothing to stop you using a clever trading name that someone is using in the next big town, as long as you are not 'passing off' i.e. pretending to be the other business. That would invite court action or some large geezers coming around to you office to "have words".

It's smarter in the internet era to have your own unique name. There are too many 'Best Dry Cleaners'. A business with a commonplace name will not rank in Google for that phrase. They are also hard to remember.

Check no one else is using it at the Google, Companies House and at the Intellectual Property Office (IPO) websites. That will give a good indication of how unique it is.

Tip: If you are selling plumbing supplies and someone else is using the name to sell beachwear, you could still use the name, but, really, you want to try and be unique. Then there is no confusion in purchasers' minds.

Keeping accounts

You can keep a basic spreadsheet of income and expenditure and have a bank account set aside through which you run your income and expenditure. Then your bank statement will function as a basic ledger, also.

Currently, in the UK, you will starting paying tax on profits after you go past the current minimal tax-free income allowance that HMRC graciously grants the working stiffs. You will also make National Insurance contributions.

The best thing about being a sole trader is that you can try out business ideas without being caught up with all the paperwork involved in maintaining a limited company.

This a a great way to see if you can sustain a profitable business before making a more serious commitment.

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