Tag: Sole trader
Do I need to register as a sole trader with HMRC, and by when?
If your gross income from self-employment is more than £1,000 in a tax year, you must register for Self Assessment. The deadline to tell HMRC is 5 October after the tax year ends. Start trading in July 2026 and you register by 5 October 2027, then file your return and pay the tax by 31 January 2028. You can register as soon as you start trading, and most accountants will tell you to get it done early. Cited to GOV.UK, checked 20 October 2026.
Sole trader or limited company: which leaves me better off on my profit?
On tax alone, at 2026/27 rates, the old rule that a company always saves you money no longer holds. A sole trader on £30,000 profit keeps about £1,065 a year more than a one-person company paying a small salary plus dividends. At £80,000 the sole trader is still ahead, by about £1,950. The company pulls back when you leave profits in the business or pay into a pension, and it brings limited liability, which is a separate question from tax. Cited to GOV.UK, checked 20 October 2026.
Can I claim working-from-home costs as a sole trader?
Yes. If you work from home for 25 hours or more a month you can claim a flat rate with no receipts: £10 a month for 25 to 50 hours, £18 for 51 to 100, and £26 for 101 or more. Phone and internet are claimed separately, on the business share of the actual bills. If your real costs are higher, you can claim a share of your actual household costs instead, but you will need the workings. Cited to GOV.UK, checked 20 October 2026.
Can a sole trader get a business loan, and how is it different from a limited company borrowing?
Yes. Sole traders borrow from the same lenders, for the same purposes. The difference is legal, not commercial: as a sole trader there is no company between you and the debt, so you are personally liable for every penny from day one. Loans to sole traders up to £25,000 are regulated like consumer credit, with extra protection. Limited company loans are not regulated that way, but lenders routinely ask directors for a personal guarantee, which puts your own assets back on the table. Cited to GOV.UK, checked 20 October 2026.
How much tax does a sole trader pay in the UK?
Short answer: you pay Income Tax and National Insurance on your profit, not on your turnover. Profit is your self-employed income minus your allowable expenses. For the 2026 to 2027 tax year, the first £12,570 of income is tax-free for most people. Above that you pay 20% Income Tax up to £50,270, then 40%. Class 4 National Insurance is 6% on profits between £12,570 and £50,270, then 2%. Cited to GOV.UK, checked 20 October 2026.
What expenses can a sole trader claim?
Short answer: you can deduct the costs of running your business from your income, as long as they are allowable expenses. You pay Income Tax only on what is left, your taxable profit. You can only claim for business costs, and you cannot claim expenses if you use the £1,000 trading allowance. GOV.UK gives an example. If your turnover is £40,000 and you claim £10,000 of allowable expenses, you pay Income Tax on the remaining £30,000. Cited to GOV.UK, checked 20 October 2026.