SOLE TRADER The Sole Trader, the simplest form of business in the UK, owns and runs the business with complete control. The Sole Trader has fewer legal formalities and obligations than in other types of businesses. Start up and running costs are relatively lower.
The ability to raise capital can be a potential disadvantage. Since the Sole Trader’s capital is usually limited, the business may not be able to respond to the requirements of expansion, competition or other market demands. Moreover, the personal liability of the Sole trader is unlimited for any losses of the business.
UK and EU nationals
Any UK or EU national can establish a Sole Trader business.
Turkish nationals
Turkish nationals can become Sole Traders in the UK under the Turkish-EC Association (Ankara) Agreement. Turkish nationals who are self-employed or wish to take up self-employment in the UK are advised to refer to the Home Office Guidance and Forms at
SETTING UP REQUIREMENTS AND OBLIGATIONS FOR SOLE TRADERS - Sole Traders must notify HM Revenue & Customs by completing Form CWF1. To download this form, click on Download Form CWF1
- An annual self-assessment form must be returned to HM Revenue & Customs
- Records of your business income and expenses must be kept. If working from home, business and personal use of home facilities such as utilities must be identified.
- The Sole Trader is advised to open a separate bank account for business transactions
- If the Sole Trader employs staff, he is responsible for deducting employee income tax and Class 1 NIC, and making payment to HM Revenue & Customs
- Business profits are taxed as income. The Sole Trader needs to pay fixed-rate Class 2 National Insurance contributions (NICs) and Class 4 NICs on profits
FURTHER INFORMATION To find further information and advice, click on HM Revenue and Customs: Guide on Working
for yourself.
