{"id":1533,"date":"2025-06-04T10:22:55","date_gmt":"2025-06-04T10:22:55","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/\/knowledge\/starting-out\/sole-trader-vs-self-employed\/"},"modified":"2026-03-31T14:47:07","modified_gmt":"2026-03-31T14:47:07","slug":"sole-trader-vs-self-employed","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/starting-out\/sole-trader-vs-self-employed\/","title":{"rendered":"Sole trader vs self-employed \u2013 what\u2019s the difference?"},"content":{"rendered":"\n<div id=\"cg_test_pre_gate\" class=\"wp-block-group is-layout-flow wp-block-group-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Deciding to start your own business is a major step that you\u2019ll need to consider carefully. Becoming self-employed has many benefits but there\u2019s a lot to think about.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Before you join the estimated four million self-employed people in the UK, it\u2019s important that you understand how things are structured and the meanings of key phrases.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So, what is a sole trader? And what counts as self-employment?<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a href=\"#difference\">Sole trader vs self-employed \u2013 is there a difference?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#can-i\">Can I be self-employed and a sole trader?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#meaning\">What is the sole trader meaning?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#employees\">Can a sole trader have employees?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#counts\">What counts as self-employment?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#register\">How do you register as a sole trader?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#responsibilities\">What are your responsibilities when you\u2019re self-employed?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"#faqs\">Sole trader vs self-employed FAQs<\/a><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"difference\">What is the difference between sole trader and self-employed?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s important to understand that there\u2019s not really a difference between being a sole trader and being self-employed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2018Sole trader\u2019 describes your business structure, while \u2018self-employed\u2019 is a way of saying that you don\u2019t work for an employer or <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/paying-paye-tax-guide-for-employers\/\" data-type=\"knowledge\" data-id=\"1493\">pay tax through PAYE<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Both terms are often used interchangeably: if you\u2019re self-employed then you\u2019re basically running a sole trader business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"can-i\">Can I be self-employed and a sole trader?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re self-employed, chances are you\u2019re considered a sole trader. The terms self-employed and sole trader are often used interchangeably.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A sole trader is one of the main types of business structure, alongside \u2018<a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/starting-out\/sole-trader-vs-limited-company\/\" data-type=\"knowledge\" data-id=\"1532\">limited company<\/a>\u2019 and \u2018<a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-structure\/what-is-a-general-business-partnership\/\" data-type=\"knowledge\" data-id=\"938\">business partnership<\/a>\u2019.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Self-employed is a more general term that describes your employment status. If you\u2019re self-employed, you work for yourself instead of as an employee and pay tax through <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/self-assessment\/how-to-do-a-self-assessment-tax-return\/\" data-type=\"knowledge\" data-id=\"24133\">Self Assessment<\/a> instead of PAYE.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"meaning\">What are the benefits of being a sole trader?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Sole trader is considered the simplest business structure and there\u2019s very little paperwork needed to get started.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some of the other benefits include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">you have full control over business decisions&nbsp;<\/li>\n\n\n\n<li class=\"wp-block-list-item\">you keep all of your profits (you don\u2019t have to split them with shareholders)<\/li>\n\n\n\n<li class=\"wp-block-list-item\">you don\u2019t have to publicly share your financial details (which limited companies have to do)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">However, as a sole trader, you\u2019re responsible for paying tax on your profits and you\u2019re personally responsible for any losses that your business makes.<\/p>\n\n\n\n<div class=\"wp-block-group has-azure-300-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-69910985 wp-block-group-is-layout-constrained\" style=\"border-radius:10px;padding-top:var(--wp--preset--spacing--20);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--50);padding-left:var(--wp--preset--spacing--90)\">\n<h2 class=\"wp-block-heading\" id=\"employees\">Can a sole trader have employees?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, sole traders can have employees as long as they remain the sole owner of the business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re a sole trader and you want to hire employees, you won\u2019t need to set up a limited company. However, you\u2019ll need to register as an employer with HMRC and <a href=\"https:\/\/www.gov.uk\/paye-for-employers\/setting-up-payroll\" rel=\"noopener noreferrer\" target=\"_blank\">submit a PAYE registration form<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Lots of sole traders have people working for them, but make sure you know the difference between a freelancer, employee, and worker as they have different rights. The government website explains <a href=\"https:\/\/www.gov.uk\/employment-status\" rel=\"noopener noreferrer\" target=\"_blank\">the differences between employment statuses<\/a>.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"counts\">What counts as self-employment?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">As a rule of thumb, you count as self-employed if you\u2019re responsible for the success or failure of your business, and you decide what work you do and when and how you do it.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This means you pay tax through Self Assessment and you don\u2019t get <a data-type=\"knowledge\" data-id=\"1222\" href=\"\/knowledge\/staff\/ssp-rate-how-much-is-statutory-sick-pay\/\">sick pay<\/a> or <a data-type=\"knowledge\" data-id=\"1275\" href=\"\/knowledge\/allowances\/can-i-get-self-employed-holiday-pay\/\">holiday pay<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re self-employed, you can work for more than one client and you usually <a href=\"\/knowledge\/cash-flow\/how-to-write-an-invoice\/\" data-type=\"knowledge\" data-id=\"1461\">submit invoices<\/a> to your clients to get paid.\n<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Read our ultimate <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/freelance\/what-is-freelance-work\/\" data-type=\"knowledge\" data-id=\"1412\">guide to going self-employed<\/a> for more information.<\/p>\n<\/div>\n\n\n\n<div id=\"cg_test_gate\" class=\"wp-block-group is-layout-flow wp-block-group-is-layout-flow cg_test_gate\">\n<div class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-30c80bf8 wp-block-group-is-layout-constrained\" style=\"border-radius:35px;margin-top:var(--wp--preset--spacing--90);margin-bottom:var(--wp--preset--spacing--90);padding-top:var(--wp--preset--spacing--90);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--90);padding-left:var(--wp--preset--spacing--90)\">\n<h2 class=\"wp-block-heading\" id=\"meaning\">What is a sole trader?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The sole trader definition is someone who&#8217;s self-employed and the sole owner of their business.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"\/knowledge\/starting-out\/sole-trader-vs-limited-company\/\" data-type=\"knowledge\" data-id=\"1532\">Unlike a limited company<\/a>, a sole trader doesn\u2019t have to <a href=\"\/knowledge\/starting-out\/how-to-register-with-companies-house\/\" data-type=\"knowledge\" data-id=\"850\">register with Companies House<\/a> or have a director.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, if you\u2019re a <a href=\"\/business-insurance\/copywriter-insurance\/\" data-type=\"page\" data-id=\"549\" >freelance copywriter<\/a>, you\u2019re self-employed and would need to register as a sole trader.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Other sole trader examples include <a data-type=\"knowledge\" data-id=\"985\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/retail\/how-to-set-up-an-online-shop\/\">running an online shop<\/a>, doing freelance consultancy work, or working as a <a href=\"https:\/\/www.simplybusiness.co.uk\/business-insurance\/plumbers-insurance\/\" data-type=\"page\" data-id=\"716\" >self-employed plumber<\/a>.<\/p>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-if-i-m-self-employed-but-working-for-an-employer\">What if I\u2019m self-employed but working for an employer?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">There\u2019s no reason why you can\u2019t be self-employed and work for an employer.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is most commonly done as a contractor or freelancer, meaning you work for them on a project-by-project basis or for a fixed term.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re working as a contractor, it\u2019s important to understand your employment status as this will affect how you pay tax. You can use HMRC\u2019s <a href=\"https:\/\/www.gov.uk\/guidance\/check-employment-status-for-tax\" target=\"_blank\" rel=\"noreferrer noopener\" rel=\"noopener noreferrer\" target=\"_blank\">Check Employment Status for Tax<\/a> tool.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, it\u2019s not always clear if you\u2019re self-employed or an employee if you&#8217;re <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/new-tax-guidance-for-hair-and-beauty-professionals\/\" data-type=\"knowledge\" data-id=\"38273\">working in a salon and renting a chair<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And if you\u2019re operating through a limited company, you\u2019ll need to <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/business-tax\/what-happens-if-im-inside-ir35\/\" data-type=\"knowledge\" data-id=\"1563\">understand how IR35 works<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"register\">How do you register as a sole trader?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Setting up as a sole trader is quick and simple. All you need to do is <a href=\"https:\/\/www.gov.uk\/set-up-sole-trader\/register\" rel=\"noopener noreferrer\" target=\"_blank\">tell HMRC that you\u2019re self-employed<\/a> so that they know you need to pay tax through the Self Assessment process.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Bear in mind that you must register for Self Assessment even if you have another job or you\u2019re only doing part-time freelance work.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you have a <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/starting-out\/how-to-start-a-side-hustle\/\" data-type=\"knowledge\" data-id=\"17811\">side hustle<\/a>, you\u2019ll need to register to pay tax if you earn above \u00a31,000 a year. Read our <a data-type=\"knowledge\" data-id=\"1546\" href=\"\/knowledge\/self-assessment\/tax-on-second-job\/\">guide to second job tax<\/a> to get started.<\/p>\n\n\n\n<div id=\"nba-body-001\">\n<\/div>\n\n\n\n<div class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-30c80bf8 wp-block-group-is-layout-constrained\" style=\"border-radius:35px;margin-top:var(--wp--preset--spacing--90);margin-bottom:var(--wp--preset--spacing--90);padding-top:var(--wp--preset--spacing--90);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--90);padding-left:var(--wp--preset--spacing--90)\">\n<h2 class=\"wp-block-heading\" id=\"responsibilities\">What responsibilities do you have after becoming self-employed?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">As a self-employed person, your main responsibilities will include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">completing a Self Assessment tax return by 31 January each year<\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a data-type=\"knowledge\" data-id=\"1440\" href=\"\/knowledge\/self-assessment\/how-to-pay-national-insurance-when-self-employed\/\">paying National Insurance<\/a> contributions and income tax on your profits<\/li>\n\n\n\n<li class=\"wp-block-list-item\">registering for VAT if your <a href=\"\/knowledge\/business-tax\/vat-registration-threshold-small-business-guide\/\" data-type=\"knowledge\" data-id=\"1556\">VAT taxable turnover<\/a> exceeds \u00a390,000<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Meanwhile, it\u2019s a good idea to keep your business-related receipts throughout the year so that you can deduct any <a href=\"\/knowledge\/self-assessment\/self-employed-expenses\/\" data-type=\"knowledge\" data-id=\"1511\">allowable expenses<\/a> from your <a href=\"\/knowledge\/income\/how-to-calculate-profit-margin\/\" data-type=\"knowledge\" data-id=\"1422\">profits<\/a> when you complete your tax return.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you hire one or more employees, you\u2019re usually legally required to have an <a href=\"\/business-insurance\/employers-liability-insurance\/\" data-type=\"page\" data-id=\"370\" >employers\u2019 liability insurance policy<\/a>.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"faqs\">Sole trader vs self-employed FAQs<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-is-an-example-of-a-sole-trader\">What is an example of a sole trader?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">An example of a sole trader is someone runs and owns their own business. A sole trader needs to inform HMRC that they\u2019re self-employed for tax purposes, and open a separate business bank account.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some examples of businesses that could be sole traders include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">plumbers<\/li>\n\n\n\n<li class=\"wp-block-list-item\">tutors<\/li>\n\n\n\n<li class=\"wp-block-list-item\">graphic designers<\/li>\n\n\n\n<li class=\"wp-block-list-item\">home bakers<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-are-the-sole-trader-advantages-and-disadvantages\">What are the sole trader advantages and disadvantages?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The main advantages of being a sole trader are the simplicity of setting up your business. You\u2019ll also have full control over your decisions, get to keep all of your profits, and don\u2019t have to publicly share your financial information.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The main disadvantage of being a sole trader is that there\u2019s no legal distinction between you and your business. This means if you get into financial difficulty, your personal assets could be at risk.<strong>&nbsp;<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-do-i-need-to-register-as-a-sole-trader-if-i-am-self-employed\">Do I need to register as a sole trader if I am self-employed?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes, if you earn more than \u00a31,000 a year from self-employment then you need to register as a sole trader with HMRC.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When you register as a sole trader, you\u2019ll need to pay tax via Self Assessment by 31 January each year.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s important to note that you must register by 5 October after the end of the tax year in which you earned more than \u00a31,000 from self-employment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-more-guides-for-the-self-employed\">More guides for the self-employed<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a href=\"\/knowledge\/starting-out\/how-to-become-self-employed\/\" data-type=\"knowledge\" data-id=\"1418\">A guide to going self-employed in the UK<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"\/knowledge\/self-assessment\/hmrc-penalties-for-self-assessment\/\" data-type=\"knowledge\" data-id=\"1399\">HMRC penalties \u2013 a guide for the self-employed<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"\/knowledge\/self-assessment\/self-assessment-deadline\/\" data-type=\"knowledge\" data-id=\"1509\">Tax year dates and deadlines for the self-employed<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"\/business-insurance\/faq\/how-much-business-insurance-do-i-need\/\" data-type=\"page\" data-id=\"578\" >How much business insurance do I need?<\/a><\/li>\n<\/ul>\n<\/div>\n\n\n\n<div id=\"nba-upsell-001\" class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-94e519ba wp-block-group-is-layout-constrained\" style=\"padding-top:var(--wp--preset--spacing--80);padding-right:var(--wp--preset--spacing--40);padding-bottom:var(--wp--preset--spacing--80);padding-left:var(--wp--preset--spacing--40)\">\n<h3 class=\"wp-block-heading has-text-align-center\" id=\"readytosetupyourcover\">Ready to set up your cover?<\/h3>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\">As one of the UK&#8217;s biggest <a href=\"\/business-insurance\/\" data-type=\"page\" data-id=\"5152\">business insurance<\/a> providers, we specialise in <a href=\"\/business-insurance\/public-liability-insurance\/\" data-type=\"page\" data-id=\"734\">public liability insurance<\/a> and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/quote.simplybusiness.co.uk\/business\">Start your quote<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n<div id=\"nba-body-end\">\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are you a sole trader after becoming self-employed?<\/p>\n","protected":false},"author":3,"featured_media":26032,"comment_status":"open","ping_status":"closed","template":"","meta":{"sb_hreflang":"","sb_hreflang_url":"","disable_breadcrumbs":false,"sb_breadcrumbs":[],"sb_reviewed_by":"","sb_review_date":"","sb_enable_content_gating":true,"footnotes":""},"categories":[336,339],"hidden-category":[],"coauthors":[20],"class_list":["post-1533","knowledge","type-knowledge","status-publish","has-post-thumbnail","hentry","category-business-structure","category-starting-out"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Sole trader vs self-employed | Simply Business<\/title>\n<meta name=\"description\" content=\"What is a sole trader? Discover the key differences between being self-employed and a sole trader, including working for an employer.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/starting-out\/sole-trader-vs-self-employed\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is being self-employed and a sole trader the same thing?\" \/>\n<meta property=\"og:description\" content=\"Are you a sole trader or self-employed? Is there a difference between the two? 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