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How to Establish a Sole Proprietorship in the United Kingdom

Sole Proprietorship in the United Kingdom enjoys several advantages as a business structure. It is one of the simplest ways of operating a business, especially when it is a start-up or a small-sized venture. A sole proprietor is a self-employed individual who owns the business. They enjoy complete freedom of operating their business on their terms. 

There are no shareholders, board of directors, or any partner liable for its profits or losses. While you enjoy the flexibility of a sole proprietorship in the United Kingdom, you also bear all the burdens and losses, which can be pretty overwhelming. If you are contemplating setting up a sole proprietorship in the United Kingdom, here are a few things that you should know.

Who can be a Sole Proprietor in the United Kingdom?

To register as self-employed in the United Kingdom, you must get registered at Her Majesty’s Revenue and Customs on an earning of £1,000 in a year from your company. Sole proprietors may pay Class 2 NICs if they apply for a mortgage or opt for free childcare. You must maintain accounting records and pay income tax by filing a self-assessment return with HMRC.

Documents Required for Registering Your Business in the UK

To register as a sole proprietor in the UK, you need to have all your documents related to your National Insurance and income tax ready. According to sole proprietorship UK law, you require paying an income tax on your profits which an annual self-assessment tax return can do. As a sole proprietor, you must pay a VAT if your business’ turnover crosses £85,000. 

Apart from the general proofs for identity and your business details, including the name and address of the company, you also need to keep all records of the profits and other intricate matters. 

Here is a list of documents you need to be ready with to register your sole proprietorship in the UK. ‍

  • Personal Income
  • Business Income
  • Business sales 
  • Bank Statements
  • Cheque stubs
  • Till Rolls
  • Bank slips and receipts

Criteria for Registering a Sole Proprietorship in the UK

You must fulfill the following prerequisites to register a sole proprietorship in the United Kingdom – 

  • As reiterated above, the first step to registering as a self-employed in the UK is to send a notification to H.M Revenue, and Customs or HMRC declaring that you will pay tax through the Self-Assessment means as part of your business structure is that of a self-employed individual. The registration with HMRC can be seamlessly done online, but you should be careful not to miss the deadlines. The Self-Assessment registration should be done within the 5th of October in your second tax year of starting a business.
  • National Insurance needs to be compulsorily paid by sole proprietors in the UK if they earn over £6,365 annually. The National Insurance scheme, per the sole proprietorship law, offers several state benefits like a State Pension. The National Insurance for sole proprietorship UK is to be paid in either Class 2 or Class 4, depending on the earnings. After deducting expenses, the final profits will depend on how much you are left with.

National Insurance Number is also a mandatory requirement to register a sole proprietorship in the UK and be eligible for paying the National Insurance Contributions. The NI is given to US residents before one turns 16. Foreigners will have the NI embossed on their residence permit while moving to the UK.

How to Register a Sole Proprietorship Company in the United Kingdom?

To register a sole proprietorship in the United Kingdom, you first need to check your legal status as an entrepreneur. If you are a foreigner thinking of setting up your sole proprietorship in the UK, you may legally require certain visa and residence permits to start a business in the nation. Once you have completed all the legal formalities and collected the documents, you need to proceed with your registration process.

  • Name and address– Sole traders can use their names to register their companies. Sole proprietorship taxes in the UK and company registration details; you also require having an official address.
  • Registering with HMRC– You need to register with HMRC to set up a sole proprietorship in the UK. Be sure to check all rules about the sole proprietorship type of business. 
  • Bank account– Sole traders need to open a sole proprietorship UK bank account through which all transactions will take place and records kept. 
  • COI– Once the company registration procedure is completed, you will receive a Certificate of Incorporation that will possess the incorporation date and registration number. 

Registration of corporation tax After starting business operations, the company needs to register for the Corporation Tax. The Unique Taxpayer Reference Code or UTR code will have to be provided to the HMRC. The 10 digit UTR number will have all the necessary details like registration number, first accounting date, etc.

Benefits of Setting up a Sole Proprietorship in the UK

Setting up a sole proprietorship in the UK comes with its quota of advantages over the other business forms. 

  • A sole proprietorship business license in the UK will enable self-employed individuals to search for skilled employees or independent consultants to work for their company. 
  • Sole proprietors are not taxed separately, and the taxation system follows the same pattern as individual residents, and they need to report all contributions made to the government. Record keeping is relatively more straightforward, and expenses are less compared to the other forms of business entities
  • Sole proprietorships in the UK have the liberty to retain complete control over the business operations and direction. Sole traders have greater flexibility in deciding on pricing, sourcing, and meeting customers’ needs, thus often striking a close bond with them. 
  • The sole proprietorship UK cost for setup is also much lower than other business forms. Depending on the kind of business you are indulging in, the start-up capital will also be much lesser, considering lesser incurring costs. 
  • The statutory filings and accounting procedures are also much more simplified. There is no need to file confirmation statements, thus leading to lesser interactions with the governing bodies and less cumbersome paperwork processes. 
  • The sole proprietorship UK law gives tax allowances on purchasing certain business equipment, vehicles, office furniture, IT equipment, etc. 

Finally, since sole proprietors in the United Kingdom do not have to divulge any information to the Company House, market competitors will have a minimal peek into your business information. This lends more privacy to your sole proprietorship in the UK.


Although a sole proprietorship is one of the easiest entities to establish, you might wonder – how to register a sole proprietorship in the United Kingdom? The key is to resort to an expert who knows the intricacies of setting up a sole proprietorship in the UK. 

As you set up your business, you may find gathering all documents and adhering to the legal procedures required to register a sole proprietorship in the UK a humongous job. In this case, partnering with an external service provider, like Multiplier, can help you seamlessly operate your business. Partnering with a global employment solution partner will help you stay abreast with the country’s laws and regulations. While offering expert advice on legal issues and helping with procedures, we can guide you through every step for a seamless and hassle-free establishment of your business venture.

Frequently Asked Questions

You can set up a sole proprietorship business in the UK as financial planners, healthcare service providers, landscaping companies, computer and laptop repair services, bookkeepers, and freelance writers.

Business loans are not quite easily available for those looking to establish a sole proprietorship business. In most cases, such businesses do not have a fixed structure and are not as established as the other forms. Hence, sole traders often may have to acquire loans against their personal belongings.

LTD or Limited, PLC, LLP, or sensitive words should not be used. Also, names should not be the same as an existing trademark company or anything related to the government, such as the word ‘accredited’ for which you need to take special permission from the Department for Business, Energy and Industrial Strategy (BEIS).

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