Accounting services for Sole Traders in London
The ideal accounting services for your sole trader business, specifically tailored to suit your operations.
- Let us manage your sole trader accounting needs.
- Empower your business growth with confident financial decision-making.
- Our accountancy package is available from £25 + VAT per month.
- Benefit from monthly reviews offering advice to enhance your business performance.
What is a Sole Trader?
A sole trader is a type of business structure where one individual owns and runs the entire business. It is the most straightforward form of self-employment in the UK, with minimal setup and administrative requirements. As a sole trader, there is no legal distinction between you and your business you keep all profits, but you’re also personally responsible for any losses or debts.
Why choose to be a Sole Trader?
Operating as a sole trader gives you full control over your business decisions, finances, and operations. It’s ideal for freelancers, contractors, small business owners, and anyone starting out on their own. The key advantages include:
- Simple setup and lower admin burden
- Full ownership of profits (after tax)
- Flexibility to make decisions quickly
However, the main drawback is unlimited liability meaning your personal assets could be at risk if the business runs into debt.
When do you need to register?
You need to register as a sole trader with HMRC if:
- You earned over £1,000 from self-employment between 6 April 2020 and 5 April 2021
- You want to make voluntary Class 2 National Insurance contributions to build up entitlement to benefits like the State Pension
Note: As soon as you begin working for yourself, HMRC considers you self-employed even if you haven’t yet officially registered.
How do I register as a Sole Trader in London?
To register, you’ll need to inform HMRC that you intend to submit a Self-Assessment tax return. This can be done by completing the online registration form through the HMRC website, which is the fastest and easiest method. Alternatively, you can download the SA1 form, complete it, and return it by post. Registration is free and should only take a few minutes if completed online.
What happens next?
When you tell HMRC about your plans to work as a sole trader, they will assign you a Unique Taxpayer Reference (UTR) and create an online portal for your Self-Assessment needs.
Shortly after this, HMRC will send you a letter with an activation code to access your online account. This account will allow you to view information concerning your tax affairs, including prior tax payments, your tax code, and upcoming filing dates.
What you get with us
Tax alerts
Get reminders for all key tax filing and payment deadlines.
Select a Software
Choose and connect FreeAgent, Xero, or QuickBooks easily.
Tax guidance
Call anytime for expert tax advice, quick, clear, and free.
Responsibilities of a Sole Trader
- Registering with HMRC
- You must register as self-employed with HMRC, typically by 5 October in your second trading year.
- You’ll get a Unique Taxpayer reference (UTR).
- Keeping accurate financial records
- Track all income and expenses related to the business.
- Keep receipts, invoices, bank statements, and mileage logs.
- Maintain these records for at least 5 years after the tax year deadline.
- Filing a self assessment Tax return
- File your Self Assessment tax return every year (usually by 31 January).
- Report your income and allowable expenses.
- Pay Income Tax and Class 2/Class 4 National Insurance based on profits.
- Paying national insurance contributions (NICs)
- Class 2 NICs if profits are above the small profits threshold.
- Class 4 NICs if profits are above the main threshold.
- Managing VAT (if applicable)
- Register for VAT if turnover exceeds £90,000 (2024/25 threshold).
- Submit quarterly VAT returns and charge VAT on sales.
- Business and legal compliance
- Ensure you comply with business licenses, industry regulations, and insurance requirements.
- Consider Professional Indemnity Insurance or Public Liability Insurance, depending on the business type.
- Paying your bills and staff (if any)
- Register as an employer with HMRC.
- Run payroll, deducting PAYE and NICs.
- Provide a workplace pension if eligible.
- Staying On top of cash flow
- Monitor cash flow and maintain a separate business bank account (optional but recommended).
- Consider accounting software to simplify this process (e.g. Xero, QuickBooks, FreeAgent).
Pros and cons of operating as a Sole Trader
A sole trader is simply a self-employed person, a popular structure in the UK. When becoming self-employed, the main alternatives are sole trader or limited company. We outline the advantages and disadvantages below.
Swift decision-making
Unlike larger entities with multi-layered management, owners, and diverse stakeholder interests that can complicate simple decisions, as a sole trader, you are both the owner and the manager, granting you complete autonomy in all business decisions.
Personal liability and the SA302 self-assessment return
A key aspect of being a sole trader is the lack of legal separation between you and your business. This means you are personally liable for any debts the business incurs. Consequently, financial difficulties can result not only in lost business income but also in personal financial obligations.
More economical accounting
Limited companies face the requirement of preparing a balance sheet and cash flow statement, whereas sole traders typically only need to complete a profit and loss account. Consequently, accountants generally charge sole traders less due to the reduced workload involved.
Challenges in securing large clients
Attracting work from substantial clients can be difficult, as many larger businesses often perceive sole traders as smaller entities and potentially a higher risk. While a limited company can be owned and run by a single individual, it often projects a more substantial image.
Full profit retention
As a sole trader, you are entitled to retain all the profits your business generates after meeting your tax obligations. There is no Corporation Tax liability, and typically, no employee payroll to manage.
Absence of sick pay
If a sole trader becomes ill and cannot work, they will not receive any income, and their business will be unable to deliver the agreed-upon services to clients or suppliers. This inability to provide services may lead clients to seek alternatives.
Enhanced privacy
Unlike limited companies, which are legally obligated to register certain information with Companies House, making it publicly accessible, sole traders enjoy greater privacy regarding specific business details.
Ongoing accounting responsibilities
Despite simpler accounting requirements, sole traders still need to maintain thorough records of receipts, handle tax obligations (including VAT if earnings exceed the threshold), and manage National Insurance contributions. As specialist sole trader accountants, we offer to manage the majority of this work for you at a fixed monthly rate.
Sole Trader & Landlord accounting from £25/month
Our tailored monthly plans offer award-winning software,
dedicated support, tax return assistance, and more.
Our accounting software partners that will grow your business
Why choose us?
Industry specific
Our ICAEW-regulated accountants specialize in your industry, understanding both your business structure and the tools you use, from software to tax strategy.
Grow your business
Whether you're just starting or scaling up, we create custom growth strategies aligned with your goals, timelines, and market challenges.
Tailored bookkeeping solutions
We manage your day-to-day bookkeeping, easing your workload and providing accurate reliable records so you can focus on growth.
Integrate all your software
We connect your accounting to leading tools like Xero, QuickBooks, and stock systems, boosting efficiency through automation and expert setup.
All in one package
As a one-stop shop for all your business needs, we provide a full range of services, from bookkeeping to legal counsel, to ensure your business's success and sustainability.
Frequently Asked Questions
Do I need an accountant as a sole trader?
While it’s not a legal requirement, hiring a sole trader accountant can save you time, ensure your tax returns are accurate, and help you claim all allowable business expenses. Professional accounting support also reduces the risk of HMRC penalties and gives you expert advice as your business grows.
When do I need to register as a sole trader with HMRC?
You must register with HMRC if you earn more than £1,000 from self-employment during a tax year. Once registered, you’ll receive a Unique Taxpayer Reference (UTR) and be required to file an annual Self Assessment tax return and pay any Income Tax and National Insurance due.
What accounting services do you provide for sole traders?
Our sole trader accounting services include bookkeeping, Self Assessment tax returns, VAT returns, payroll, tax planning, cloud accounting software support, business advice, and ongoing financial guidance. We also provide regular reviews to help improve your business performance.
Which accounting software do you support?
We are certified partners of Xero, FreeAgent, and QuickBooks. We help you choose the right software, set it up, and provide training so you can easily manage your income, expenses, invoices, and tax obligations from anywhere.
How much do your sole trader accounting services cost?
Our sole trader accounting packages start from £25 + VAT per month. Fixed monthly pricing includes expert accounting support, access to leading cloud accounting software, tax reminders, Self Assessment assistance, and ongoing advice with no hidden fees.