A sole trader is essentially a self-employed person who is the sole owner of their business. It is the simplest business structure out there, which is probably why it's the most popular. You can set up as one via the GOV.UK website (you'll need to do this for tax purposes)
The business and the person are not separate entities, and as a sole trader, you're personally responsible for any losses the business makes. Likewise, you keep all of the profits after you've paid tax on them. Sole traders are personally responsible for keeping records of business sales, spending and financial affairs. This includes sending a Self Assessment tax return every year and registering for VAT if and when your takings are over the VAT threshold, registering for CIS.
As a Sole Trader you can be:
- An employer and run a PAYE, you can not employ yourself.
- You can also be a Contractor under CIS.