Going Solo? The Ultimate Sole Trader Starter Guide
Ryan Scott • 10 May 2025
Starting Out as a Sole Trader: Setup, Tax, and What to Expect
Starting out as a sole trader can be an exciting step, but before diving in, it’s important to understand exactly what it involves. From legal responsibilities to financial obligations, there’s a lot to consider. At SBX Accountants, we break it all down so you can confidently manage your business and stay on top of your compliance.
Choosing the Right Business Structure
Deciding on the right legal structure is one of the first major decisions you’ll make. Your choice will depend on factors like expected earnings, the industry you’re in, and whether you’re going into business solo or with others.
It's not just about setup—it also affects your liability, how you’re taxed, and how much admin you’ll be responsible for. We’ve explored this in more detail in our blog: What Type of Legal Structure Should I Choose?.
Sole Trader vs Self-Employed – What’s the Difference?
While "self-employed" refers to anyone who runs their own business, it’s not a legal structure. You still need to formally register under a structure—like sole trader, partnership, or limited company.
As a sole trader, you are the business. This gives you full control and allows you to keep all your profits (after tax), but it also means you’re personally responsible for any business debts.
How to Register as a Sole Trader
You can register as a sole trader through your Government Gateway account—and if you don’t have one yet, it’s
quick to set up.
Your Key Responsibilities as a Sole Trader
Running a business as a sole trader comes with legal and financial duties, including:
• Keeping detailed and accurate business records
• Filing a
Self Assessment
tax return each year
• Paying income tax and National Insurance on your profits
• Submitting
VAT returns
if your turnover exceeds the threshold
Understanding Tax Obligations
As a sole trader, you’ll report your income through Self Assessment and pay tax on your profits. The amount you owe depends on how much you earn, so staying on top of your records is vital. It helps you forecast your tax bill and avoid surprises.
Need help planning your taxes? SBX Accountants can assist you with everything from filings to forecasting.
Why Bookkeeping Matters
Bookkeeping isn’t just a good habit—it’s legally required. It gives you a clear picture of how your business is performing and helps you avoid costly mistakes.
Bookkeeping means logging all income and expenses, including sales, invoices, receipts, wages, and more. With the rollout of Making Tax Digital for Income Tax, maintaining digital records will become even more critical.
To learn the essentials, see how we can help with your bookkeeping.
What Records Should Sole Traders Keep?
Even though you won’t submit records with your tax return, HMRC can ask for them at any time—so they need to be complete and accurate. You must keep records of:
• Sales and income (including receipts and invoices)
• Business-related expenses
• PAYE records (if you employ staff)
• VAT transactions (if registered)
Records must be stored for at least five years after the January 31 tax deadline for the relevant year.
Do I Need to Register for VAT?
If your taxable turnover exceeds £90,000 in a 12-month period, VAT registration is mandatory. Voluntary registration may also be beneficial in some cases—especially if you work with VAT-registered clients—but it depends on your circumstances.
We recommend speaking with
SBX Accountants
to assess whether VAT registration is right for you.
What Business Expenses Can I Claim?
One of the benefits of being a sole trader is the ability to claim expenses that are "wholly and exclusively" for business use. Common examples include:
• Office supplies and equipment
• Business travel and mileage
• Marketing and advertising costs
• Professional fees and software subscriptions
• Phone and internet bills used for work
You’ll need to keep proof—like receipts or invoices—to back up any claims.
Need Support?
Whether you’re just starting or need help managing your sole trader account,
reach out
and we can give you advice on your individual circumstances.
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