What are the responsibilities of a Sole Trader?
Sole traders have a set of legal responsibilities:
Choose a business name:
There are some restrictions in choosing a business name for a sole trader. You are not required to register your business name with Companies House, but you must follow the naming restrictions. It can be your name or a separate business name, and it must be displayed on all your paperwork like invoices. You cannot have the same business name as an existing trademark. You also cannot include any offensive words in your business name. There are lists of 'sensitive words and expressions that you cannot use unless you obtain permission from professional organisations. A sole trader can not include ‘Limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’ in the business name.
Register With HMRC:
If you are self-employed, you must register to pay your income tax through the self-assessment system. When you become a sole trader, you must inform HMRC by registering for self-assessment. This means that you must file an annual self-assessment tax return to declare your earnings and expenses and calculate the tax on your profits. You can also pay your Class 2 National Insurance contributions with your tax return.
To become a sole trader, you must:
1. Contact HMRC - Inform HMRC that you are self-employed and will be paying tax as a sole trader.
2. Fill out the HMRC self-assessment registration form, either online or by post.
3. Set up your HMRC online account. HMRC will send you a 10-digit Unique Taxpayer Reference and an activation code for your online account once you have completed the registration form.
4. Use the online account you created to file your annual self-assessment tax returns.
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