Setting up as a Sole Trader – All You Need To Know
Being self-employed as a sole trader is one of the easiest ways to set up your own business. However, it’s important to take a few steps when setting up to ensure you remain compliant and keep on top of your books.
1. Register with HMRC
First things first, you must register as a sole trader with HMRC. Doing this will provide you with a **Unique Taxpayer Reference (UTR)** which you can use to file your self-assessment tax return each year. You can do this either online or by post using the CWF1 form.
2. Open a Separate Bank Account
Although it isn’t a legal requirement, it is highly recommended to set up a separate business account. This will separate your personal and business finances, make record-keeping much easier and generally help you to stay organised.
3. VAT Registration
You only need to register for VAT if your turnover is over **£90,000** within a 12-month period. However, some sole traders voluntarily register to reclaim VAT on expenses or to appear more professional in the eyes of clients.
4. Select Bookkeeping Software
Digital bookkeeping software will make it much easier to record income and expenses, submit returns and remain MTD compliant. Plus, most packages also enable you to submit your tax return directly, reducing admin time even further.
5. Seek Support if Needed
Becoming self-employed can be a daunting prospect but there’s no need to feel like you need to do everything yourself. An experienced accountant can help to walk you through the setup process, keep you tax efficient and help you avoid making common mistakes.
Our Thoughts
Setting up as a sole trader is a big step, but if you take a few precautions first, the process can be as stress-free as possible. Register as a sole trader with HMRC, keep your finances separate and embrace digital bookkeeping software to give yourself the best possible start.
📞 Thinking of setting up as a sole trader? Bright Ideas Accountancy helps freelancers and small business owners set up in business with confidence and remain compliant from day one. Get in touch to see how we can help.
