Is There A Difference Between Being Self-Employed and Being a Sole Trader?

Simply put, there isn't much of a difference between being a "sole trader" and being a "self-employed" person on a day-to-day basis. Self-employment refers to someone who does not work for an employer and does not pay PAYE tax, while sole trader refers to your business structure.

The terms "self-employed" and "sole trader" can both refer to the same set of responsibilities.

One of the most common business structures is the sole trader, which is followed by the limited company and the business partnership. If you work for yourself, you're probably referred to as a sole-trader.'

The simplest business structure is a sole trader, as it requires the least amount of paperwork to get your business up and running. A sole trader is personally liable for any losses incurred by the business, as well as paying tax on profits.

When it comes to employment law and taxation, being self-employed can be a little more complicated, but the simplest way to understand it is that it refers to those who are fully responsible for the success or failure of their business, as well as deciding what work they do and when they do it. Self-employed people must also pay tax through self-assessment tax return rather than PAYE because they do not receive sick pay or vacation pay.

A self-employed individual can work for as many or as few people as they choose, and in order to get paid, they normally send an invoice to their clients.

A lone trader is a self-employed person who is also the business's sole owner. There is no requirement for sole traders to have a director or to register with Companies House.

Examples of self-employed people include:

• A freelance business consultant is both self-employed and registered as a sole trader.

• Self-employed and registered as a sole trader is a builder who works his own hours and chooses which jobs he does.

• A yoga instructor who teaches at various gyms is self-employed and registered as a sole trader.

What steps do I need to take to become a single trader?

It's easy to register as a single trader; all you have to do is notify HMRC that you're self-employed and will be paying tax using the self-assessment system. After you've informed them that you're ready to go, you may begin doing business.

Being Self-Employed Has Its Drawbacks

As a single trader or self-employed person, you are responsible for filing your annual tax return, as well as paying income tax and national insurance contributions on any profits you make.

Employers' liability insurance is required by law if your company employs one or more employees.

There is no requirement for business insurance if the business is only one person, unless the profession itself requires insurance under a governing authority (accountants etc).

A public liability insurance policy or a professional indemnity insurance policy may be appropriate for any business to cover the owner in the case of a customer or third-party claim.

Accountants in Croydon help small businesses & startups with their accounting and taxation matters, bookkeeping to keep their business running perfectly.

Accountants in Croydon help small businesses and startups with their accounting and taxation matters, to keep their business running smoothly.