Test yourself

Fill in the gaps with the missing words.

Set up as a sole trader
If you’re a sole trader, you (1 p.) your own business as an individual and are (1 p.) -employed.
You can keep all your business’s profits after you’ve paid (1 p.) on them. You’re personally responsible for any losses your business makes. You must also follow certain rules on running and naming your business.

How to register
You need to set (1 p.) as a sole trader if any of the following apply:
• you earned more than £1,000 from self-employment (1 p.) 6 April 2021 and 5 April 2022
• you need to prove you’re self-employed, for example to claim Tax-Free Childcare
• you want to make voluntary Class 2 National Insurance payments to help you qualify for benefits
To set up as a sole trader, register for Self Assessment and (1 p.) a tax return every year.

Your responsibilities
You’ll need to:
• keep records of your business’s sales and expenses
• send a Self (1 p.) tax return every year
• pay (1 p.) Tax on your profits and Class 2 and Class 4 National Insurance- use HMRC’s calculator to help you budget for this
You’ll need to apply for a National Insurance number if you’re moving to the UK to set up a business.

You must register for VAT if your turnover is over £85,000. You can register voluntarily if it suits your business, for example if you sell to other VAT-registered businesses and want to reclaim the VAT.

Naming your business
You can (1 p.) under your own name, or you can choose another name for your business. You don’t need to register your name.
You must include your name and business name (if you have one) on official paperwork, for example invoices and letters.

Business names
Sole trader names must not:
• include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’
• be offensive
• be the same as an existing (1 p.) mark.
Your name also can’t contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, unless you get permission.

Source: https://www.gov.uk/set-up-sole-trader