sole trader – a business that is owned and operated by one person
(Pronounced sohl tray-duh)
To remember what sole trader means use the following mnemonic:
The soul trader (sole trader) owned and operated the business by herself.
If you are a sole trader, you run your own business as an individual and work for yourself. This is also known as being self-employed and includes people who work in the ‘gig economy’ (people who pick up varied short-term contracted work).
Sole trader examples include:
Tradespeople – plumbers, electricians or gardeners.
Freelance workers – graphic designers, web designers, photographers.
Independent contractors – tutors, couriers.
Shopkeepers – butchers, beauticians, hairdressers.
Once per year, you must gather all the payment receipts for any expenses involved in your business, over the year, such as fuel or material costs. If you have earnt enough, you are liable to pay tax. You submit a tax return self-assessment form to the tax office every year and pay tax on all the profits above the tax-free threshold for that year (you can earn some money without ever paying tax on it).
(Note: 63% of UK businesses were sole traders in 2022, the largest percentage of working people. Decisions made by the government that affect sole traders can have a massive impact on the economy).