Frequently Asked Questions

Sole traders and partners are classed as self-employed by HM Revenue and Customs (HMRC). This includes selling goods or services ('trading'), unless you're just selling a few unwanted items occasionally.

No. There is no straightforward legal definition of what it means to be employed or self-employed. Over the years, the law courts have looked at this question many times, and they have identified some situations in which you are definitely employed and others when you are definitely self-employed. But there are other situations where the boundaries are less clear.

You can use your own name or trade under a business name - read the rules for naming your business. You must include your own name and business name (if you have one) on any official paperwork, like invoices and letters.

Your responsibilities include keeping records of your business's sales and expenses, sending a Self Assessment tax return every year, paying Income Tax on your profits and Class 2 and Class 4 National Insurance, managing your business debts and bills, and registering for VAT if your turnover reaches the VAT threshold.

A limited company is an organisation that you can set up to run your business. It's responsible in its own right for everything it does, and its finances are separate from your personal finances. Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

You must tell HM Revenue and Customs (HMRC) if you’ve stopped trading as a sole trader or you’re ending or leaving a business partnership. You’ll need to send final tax returns and tell employees that you’re closing your business.

Send your tax return by the deadline (31 January if you file online). If you didn’t send an online return last year, allow extra time (up to 20 working days) as you’ll need to register first.

You’re exempt from PAYE if none of your employees is paid £112 or more a week, gets expenses and benefits, or has another job. You must still report to HMRC and pay Class 1 National Insurance contributions for your employees.