Being a sole trader is the simplest way to run a one-person business, and does not involve paying any registration fees. Keeping records
and accounts is straightforward, and you get to keep all the profits. But you are personally liable for any debts that your business runs
up, which can make this a risky option for businesses that need a lot of investment.
Set-up
You need to download and complete form CWF1 to register as self-employed from the HM Revenue & Customs website (PDF).
Management and raising finance
You make all the decisions on how to manage your business.
You raise money for the business out of your own assets, and/or with loans from banks or other lenders.
Records and accounts
You have to make an annual self-assessment return to HM Revenue & Customs.
You must also keep records showing your business income and expenses.
Profits
Any profits go to you.
Tax and National Insurance
As you are self-employed, your profits are taxed as income. You need to pay fixed-rate Class 2 National Insurance contributions (NICs)
and Class 4 NICs on your profits.
Liability
As a sole trader, you are personally responsible for any debts run up by your business. This means your home or other assets may be at risk
if your business runs into trouble.
