Sole Traders and Tax

What information do I need to notify to the authorities if I intend to start my own business or become self employed?

The day you become self employed

The day you become self employed will bring with it various requirements which you must adhere to. The first of which is that you must notify the HMRC the Inland Revenue within three months after the month that you became self employed of your change of circumstances.

Self employed people operating as sole traders are subject to the same rules of taxation as the rest of the workforce operating under the pay as you earn regulations. As a consequence you will have to pay both income tax and national insurance on your earnings.

Tax Return and Tax Liability

Being self employed as a sole trader in the UK will mean that you are required to complete a tax return each year and calculate your tax liability paying it to HMRC the Inland Revenue.

What Regulations apply to sole traders?

If you start and run your own business you will be required to adhere to various Government Regulations which will require you to keep various records pertaining to your business and fill out various forms.

The following two forms of regulations are the most important regulations for sole traders:

  • VAT Regulations
  • PAYE Regulations, tax and national insurance

VAT Regulations

It is your sole responsibility to register your company for VAT. You will be required to register for VAT if one of the following conditions is met:

  • At the end of any month the total value of the taxable supplies you have made in the past twelve months or less is more than the current VAT threshold
  • At any time you have reasonable grounds to expect that the value of your taxable supplies will be more than the current registration threshold in the next thirty days alone

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For more information on:

  • What is the current VAT registration threshold?
  • What is the case if I take over a business run by someone else?
  • If I take over a business what will be my date of registration?
  • What happens if my business is below the threshold?
  • How do I register?
  • PAYE Regulations, tax and national insurance