Being a sole proprietor is hard work! That’s why we offer accounting services for sole traders so you can focus on the day job!
When should I set up as a sole trader?
Knowing when to register as a sole trader can be confusing. You should look to register if:
- The income you’ve earnt from self-assessment is more than £1,000 in a tax year.
- You need to claim tax-free childcare and need to prove that you’re self-employed.
- You want to qualify for benefits and need to make voluntary Class 2 National Insurance payments.
If any of the above apply to you, you need to register for self-assessment.
I’ve registered as a sole trader, what next?
Firstly, you will need to start (if you haven’t already!) keeping accounting records such as sales and purchase invoices. The best way to store your accounting records is to be on an accounting system such as Xero, QuickBooks or Sage.
Secondly, you’ll need to also consider whether or not you need to be VAT registered. The VAT threshold in the UK is an £85,000 turnover. If you exceed this, you will need to register for VAT. If you wish to be VAT registered beforehand, you can do a voluntary registration.
If you work in the construction industry, you will also need to consider registering for CIS. This registration is really important if you are working for a contractor as without it, they can withhold 30% in tax instead of 20%. If you are using sub-contractors, you will also need to register to file CIS returns and deduct their tax accordingly.
Your business may be considering taking on employees. If so, you will need to register for PAYE and consider your auto enrolment obligations for their pension.
Lastly, now is a good time to look at engaging an accountant to be able to deal with your accounts and personal tax return.
What are my filing obligations?
Currently as it stands, you will need to file a personal tax return each tax year and pay any tax due. Your personal tax return will need to be filed and any tax paid, by 31 January of the following year.
This will be subject to change for some sole traders when Making Tax Digital for self assessment is introduced in April 2026. To find out more about these changes, please click the button below.