Sole trader
In short. A sole trader is a self-employed individual who runs a business in their own name. There is no separate legal entity, so the owner receives the profits, is taxed on them through Self Assessment, and is personally responsible for the business's debts.
Last checked against its sources on 10 October 2026. How we write these.
Being a sole trader is the simplest way to trade. The UK government describes it as the easiest business structure to set up and keep records for. You make all the decisions and you keep the profits after tax.
The trade-off is liability. A sole trader has unlimited liability, which means personal assets can be at risk if the business cannot pay what it owes. Business insurance can reduce some of that exposure but does not change the legal position.
In the UK, you can start trading without registering as a business first, but you must register for Self Assessment if you earn more than 1,000 pounds in a tax year, and you must keep records of income and expenses to work out your profit or loss.
A typical example is a freelance electrician who invoices customers directly and files a yearly tax return. Many people start this way and later form a limited company once income, risk or the need to hire grows. Moving structure later is possible but has tax and contract consequences, so it is worth taking advice before the change.
Questions people ask
Is a sole trader the same as being self-employed?
In the UK, a sole trader is a self-employed person who runs their own business. The terms are closely linked, though self-employment can also include partners in a partnership.
Can a sole trader have employees?
Yes, in the UK a sole trader can employ staff, but then takes on employer duties. The business is still legally the same person as its owner.
Sources
- GOV.UK: Set up as a sole trader checked 10 October 2026