Starting Out

Starting your business as a sole trader is the easiest and quickest way to start a business. Although it also has the least red tape of all types of business, there are some legal requirements.

Tell HMRC

When you start a new business as a sole trader you are required to inform HM Revenue and Customs (HMRC) that you have become self employed. This is simple to do, just call their Helpline for the Newly Self-Employed, they are on
08459 15 45 15.

National Insurance

You will normally need to pay 2 types of National Insurance as self employed.

Class 2 - Fixed fee, paid monthly by direct debit or you can choose to be billed quarterly.

Class 4 - This is calculated as a percentage of your annual profits from your Self Assessment Tax Return, but is only payable when your profits reach a certain lower limit.

Self Assessment

This is the tax return that you must complete each year as self employed. The figures you provide are used to calculate your Income Tax and class 4 National Insurance.

You can do this either online or by submitting a paper copy. If you do it online you get an extra 3 months to complete it.

A Statement of Account will be sent to you by HMRC once you submit your Self Assessment.

It shows how much you:

  • owe
  • have paid
  • have to pay

Keep your record in order

To enable you to provide accurate figures to HMRC you must, by law, keep accurate records for your business. Make sure you start your business by doing this as it's very difficult to do it accurately months down the line.

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