Sole trading business is one of the common methods of setting up business in the UK.

You can set up a business in the UK as a Sole trader. When this method, the taxpayer and the business are treated as the same person legally. Therefore personal tax is due on the profit made from the business. To start the business, you will have to register online with the HMRC by visiting  https://www.gov.uk/register-for-self-assessment  

When and how to notify HMRC of the sole trading business.

When you start a new sole trading business, you are expected to notify HMRC of your change in circumstances. This notification must be done within 6 months after the end of the tax year they started trading(5th of April). When HMRC is not notified there will be penalties that will be due which will be based on tax unpaid by the  HMRC. To register for self-assessment, you will have to set up a Government Gateway user ID and password to sign in to be able to set up the registration. Whilst the registration is done, you will need proof of ID and information for identification with the HMRC. When the registration is done you will receive will a letter from HMRC with your Unique Taxpayer Reference (UTR) number within 10 days (21 if you’re abroad). This UTR number is very important as you will be using this when your self-assessment returns are submitted. With this registration with the HMRC, you will be receiving automated notification to file your self-assessment returns from the revenue.

Tax paid by Sole traders

The tax and national insurance paid by sole traders are different from employees. The tax paid is based on the profit made rather than the money paid. Profit made is determined after deducting business expenses from the money made from the business. Two types of National insurance are paid as well. Weekly payments of Class 2 national insurance and Class4 paid on profit made in the business. This tax is paid twice yearly on the 31st of January and the 31st of July.

Conclusion.

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