What is the difference between sole trader and self-employed?
To summarise, the main difference between sole trader and self employed is that ‘sole trader’ describes your business structure; ‘self-employed’ means that you are not employed by somebody else or that you pay tax through PAYE.
Sole Trader vs. Self-Employed
A sole-trader is a self-employed person who is also the business’s sole owner. As a sole trader, your personal assets aren’t separate from your business assets. This means that if you owe money and don’t pay it back, creditors can seize your property and/or home.
Key Distinctions
- A sole trader is a self-employed person who owns and runs their own business as an individual.
- You can be employed and self-employed at the same time.
You pay tax through self-assessment, and there is no paid holiday leave or sick pay. For the purposes of tax and employment law, self-employment means you hold full responsibility for the outcome of your business.
When starting up your own business, there are a few different business structures that you can choose from. Two of the most common are sole trader and self-employed. While these two terms are often used interchangeably, there are actually some key differences between them.
In the U.K., there are two main types of businesses: sole traders and limited companies. Sole traders are self-employed individuals who run their businesses by themselves. Limited companies are businesses that have been registered with Companies House, and the individuals that run them are company directors.