Overview

If you start working for yourself, you’re classed as a sole trader – even if you’ve not yet told HM Revenue and Customs.

You must register and follow rules for self-employed tax and National Insurance.

Check what counts as self-employed if you’re not sure about your status.

Other ways to work for yourself

Instead of being a sole trader, you might find that a different legal structure is better for your business.

You can:

If you set up a limited company, you’re not classed as self-employed but as both an owner and employee of your company. You’ll follow different rules on tax and National Insurance.

2. What counts as self-employed

Sole traders and partners are classed as self-employed by HM Revenue and Customs (HMRC).

You probably self-employed if you:

  • run your business for yourself and take responsibility for its success or failure
  • have several customers at the same time
  • can decide how, where and when you do your work
  • can hire other people to do the work for you or help you at your own expense
  • provide the main items of equipment to do your work
  • are responsible for finishing any unsatisfactory work in your own time
  • charge an agreed fixed price for your work
  • sell goods or services to make a profit

Many of these also apply if you own a limited company but you’re not classed as self-employed by HMRC. Instead you’re both an owner and employee of your company.

You can be both employed and self-employed at the same time, eg if you work for an employer during the day and run your own business in the evenings.

Use HMRC’s Employment Status Indicator or contact HMRC for advice if you’re still not sure what your employment status is.

Selling goods or services

You could be classed as a trader if you sell goods or services. If you’re trading, you’re self-employed.

You’re likely to be trading if you:

  • sell regularly to make a profit
  • make items to sell for profit
  • sell online, at car boot sales or through classified adverts on a regular basis
  • earn commission from selling goods for other people
  • are paid for a service you provide

You’re probably not trading if you sell some unwanted items occasionally.

Contact HMRC for advice if you’re not sure whether you’re trading.

3. What you need to do

To register as a self-employed sole trader, you’ll need to:

Read more if you want to become a partner in a business partnership or set up a limited company.

VAT

You must register for VAT if your business turnover is over £81,000. You can register voluntarily if it suits your business, eg you sell to other VAT-registered businesses and want to reclaim the VAT.

 

 

 

For more information on business and being self employed visit the gov.uk website