If you have decided to work for yourself as a sole trader, here are some tips for setting yourself up with HMRC

What is a sole trader?

A sole trader is someone who runs their own business as an individual, and is self-employed.

HM Revenue & Customs (HMRC).

Sole traders must register with HMRC and follow certain rules when naming and running their business.

Registering to file your self assessment tax return.

You should register for self assessment and class 2 National Insurance as soon as possible after starting your business, regardless of whether you have previously completed tax returns. You should register by October 5th in the second tax year, or you could face a HMRC fine.

If you have submitted a tax return before.

– Register online with HMRC (www.online.hmrc.gov.uk/shortforms/form/CWF1ST). You will need your 10 number Unique Taxpayer Reference (UTR) from your previous registration for self assessment.

– If you have previously registered for on-line services you should use the same account.

If you haven’t submitted a tax return before.

– Register online with HMRC (www.online.hmrc.gov.uk/registration/newbusiness/introduction) and you will receive a 10 number Unique Taxpayer Reference (UTR). Alternatively you can complete an on-screen form, to print off and post to HMRC.

– You will be enrolled to use the self assessment on-line service at the same time.

– You should receive a letter within 10 working days with an activation code, which you will use when you first log in to your on-line account.

Your responsibilities include:

– Keep records of your business sales and expenses

– Send a self assessment tax return every year

– Pay Income tax on your profits, and class 2 & class 4 national Insurance

Value Added Tax (VAT).

You can voluntarily register for VAT if its suits your business, however you must register for VAT if your turnover exceeds £83,000.

Working in the Construction Industry?

If you are working in the construction industry as a sub contractor or contractor, you should register for the Construction Industry Scheme (CIS).

Naming your business.

– As a sole trader you don’t have to register with Companies House – but you still need to follow the rules for choosing a business name.

– You can trade under your own name or under a business name. However you can’t use a business name that is the same as, or ‘too similar’ to, another registered business, so we would suggest that you search the companies house on-line register to see if your preferred name has been taken. Your business name also must not contain a sensitive word or expression, be offensive, or suggest a connection with government or local authorities.

If you need help with registering as a sole trader, the preparation of your annual accounts, and filing your self assessment tax return with HMRC please use the contact us facility and we will be very pleased to help.

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