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For a successful business, you need a viable business idea, the skills to make it work and the funding. Discover whether your idea has what it takes.

Forming your business correctly is essential to ensure you are protected and you comply with the rules. Learn how to set up your business.

It is likely you will need funding to start your business unless you have your own money. Discover some of the main sources of start up funding.

Businesses and individuals must account for and pay various taxes. Understand your tax obligations and how to file, account and pay any taxes you owe.

Businesses are required to comply with a wide range of business laws. We introduce the main rules and regulations you must comply with.

Learn why business planning is an essential exercise if your business is to start and grow successfully, attract funding or target new markets.

Marketing matters. It drives sales and helps promote your brand and products. Discover how to market your business and reach your target customers.

Some businesses need a high street location whilst others can be run from home. Understand the key factors from cost to location, size to security.

Your employees can your biggest asset. They can also be your biggest challenge. We explain how to recruitment and manage staff successfully.

It is likely your business could not function without some form of IT. Learn how to specify, buy, maintain and secure your business IT.

Few businesses manage the leap from start up to high-growth business. Learn what it takes to scale up and take your business to the next level.

Set up a business

What is a sole trader? It simply means being self-employed, although sole traders can also have employees.

Being a sole trader involves some personal financial risk. Sole traders must pay their debts if their business fails. If you're thinking of starting up a low-cost business (ie one that is unlikely to build up big debts), you probably needn't worry too much.

However, if you're likely to build up significant business debts, it might be better to form a limited company (ie 'incorporation'), which protects your personal finances.

Why become a sole trader?

Registering as a sole trader is quick, easy and involves no cost, while preparing sole trader accounts is usually quite straightforward. Sole traders can employ people and become a limited company ('incorporate') later on, if they want to.

Setting up and running a limited company requires more admin than being a sole trader, plus you (or a formation agent) must register your new company at Companies House.

Although anyone can become a sole trader, you might need a licence or permit from your local authority depending on the type of business you plan to set up. Seek advice if you're not sure.

How to register as a sole trader

You must register your sole trader business with HM Revenue & Customs (HMRC) as soon as possible - otherwise you could be fined to the equivalent of 100% of the tax due, as well as having to pay the tax itself. This is true even if you are only running your sole trader business on a part-time or casual basis.

Many entrepreneurs start their business off part-time - to test the water or while the business grows enough to generate enough income. Some continue working as an employee during these early days so that they have a salary to fall back on.

In these cases, you will still need to register with HMRC if your employment status indicates you are self-employed for some or all of your work.

The easiest way to register as a sole trader is through the HMRC Online Service or their 'Newly Self-Employed Helpline' on 0300 200 3504. You will need to provide:

  • your name;
  • your date of birth;
  • your address;
  • your telephone number;
  • your National Insurance number;
  • the business' start date;
  • the name and type of business;
  • whether you're a sole trader or working with a partner.

The process is quick and easy if you have the information to hand.

Alternatively, complete the HMRC form 'Register if you're a self-employed sole trader'. It will then need to be printed and posted to HMRC.

What tax will I pay as a sole trader?

As a sole trader business, you pay income tax on any business profits. You (or your accountant) must fill in a self-assessment tax return each year, detailing your income and expenses.

You'll also have to make flat-rate Class 2 National Insurance contributions (NICs) of £2.95 per week for 2018/19 (£2.85 fro 2017/18). The abolition of Class 2 NICs has been delayed until April 2019. Class 2 NICs are collected at the same time as your tax via self assessment.

If your annual profits exceed £8,424 for 2018/19 (£8,164 for 2017/18), you'll also have to pay Class 4 NICs at 9% on profits up to £46,250 (£45,000 2017/18); 11% on annual profits above this figure. You pay this with your income tax and the figure is calculated from your self-assessment tax return.

You must keep detailed financial records for your business, as well as proof of any expenses (eg receipts, invoices, utility bills, etc). Both will be invaluable when it's time to fill in your tax return each year.

If, you employ people as a sole trader, you need to collect income tax and NICs from them and pay these to HMRC. You'll also need to operate a PAYE (Pay As You Earn) payroll scheme and enrol eligible employees into a pension scheme and contribute towards it.

If you expect VAT taxable turnover to be more than £85,000 (since 1 April 2017) a year, you must register for VAT, charge it to your customers and pay it to HMRC. If you are VAT-registered, you can reclaim the VAT you pay to your suppliers.

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