A sole trader is by definition a person who works for themselves and runs their own business. It is called personal ownership, and because the business is not incorporated, it and its owner are considered the same legal entity. The owner is therefore personally responsible for all business debts.
The UK’s most popular business structure is the sole trader. It is easy to get started and allows for the owner of a business to trade with less accounting and reporting requirements than their limited company counterparts.
The business owner has full control of all decisions, and is responsible for all operations and tax obligations. It’s no wonder that self-employed individuals, such as tradespeople and freelancers, are so fond of this business structure.
What are the advantages of being a sole trader?
It’s important to know that each business structure has its own advantages. This will help you select the best one for your situation, goals, and aspirations.
Quick and Easy Installation
It is easy, quick and cheap to set up a sole-trader. You can register with HMRC for self-assessment if you earn over £1,000 per year. It’s much easier to set up as a sole trader than a limited one.
Full Autonomy
You have complete control of every aspect of your business, from the day-to-day routine to the long-term strategy. You don’t need to call the director’s or ask for approval.
Flexibility
This gives you more flexibility to operate. You can set your own terms, take quick decisions and respond quickly to threats and opportunities to keep your business responsive.
Less Admin
In the beginning, sole traders have minimal administrative obligations. They are mainly responsible for keeping records and submitting an annual tax return. This will change in April 2026 with Making Income Tax Digital for Self-Assessment being introduced for sole entrepreneurs earning more than £50,000. To ensure compliance, it’s crucial to understand your obligations and to prepare in advance. For Accountants Bristol, contact https://www.chippendaleandclark
Easier Taxation
The tax rate for sole traders is the same as that of limited companies. It is simpler for sole traders to do this than limited companies, who must pay Corporate Tax and directors are taxed separately based on their salary or dividends. If you earn more than £90,000,000, you’ll need to register for the VAT.
Control over Profits
The business owner can use the profits they have earned after taxes for whatever purpose they choose, be it personal savings, business expansion, or reinvestment. For limited companies, the profits belong to the company and must be withdrawn in accordance with certain formalities.
