Starting a small business Sole trader or Limited
Discussion
Hi everyone,
Hope you can help here.
I’m looking to start my own small business in Scotland.
Van
No premises
Just me working
What do I need to be thinking about?
Name of course
Business registration
Banking for business
Insurances
Advertising
Training for what I’m going to be doing (I don’t require an apprenticeship or anything of that nature)
And more…
What I need to think about is being a sole trader or a Ltd company.
Bear in mind I’ll be just starting out.
I won’t be buying materials everyday like a joiner, plumber etc. might be.
There’s some specific kit I need and after that it’s my time.
Id be interested to hear some real world experience, rather than just Google and AI chat my answers.
Thanks very much!
Hope you can help here.
I’m looking to start my own small business in Scotland.
Van
No premises
Just me working
What do I need to be thinking about?
Name of course
Business registration
Banking for business
Insurances
Advertising
Training for what I’m going to be doing (I don’t require an apprenticeship or anything of that nature)
And more…
What I need to think about is being a sole trader or a Ltd company.
Bear in mind I’ll be just starting out.
I won’t be buying materials everyday like a joiner, plumber etc. might be.
There’s some specific kit I need and after that it’s my time.
Id be interested to hear some real world experience, rather than just Google and AI chat my answers.
Thanks very much!
VAT? If you are dealing with the consumers then VAT will make you 20% more expensive. If you are working with businesses then they might prefer to deal with a Ltd company rather than a ST. If you work as a ST then you will eventually come under the MTD Income tax regime, but as an Ltd you might have higher accountancy costs.
What sort of work are you doing - could you end up messing up something expensive? As a ST all your assets could be on the line (liability insurance is essential of course).
What sort of work are you doing - could you end up messing up something expensive? As a ST all your assets could be on the line (liability insurance is essential of course).
Limited status protects you personally from the consequences of the financial failure of the business. As a sole trader, if a client goes bust and you run out of money causing the business to fold, you will be personally liable for anything due to be paid to banks, HMRC, suppliers etc. As a limited company you stand to loose only your initial investment.
It's swings and roundabouts; Limited protects you but will cost you more (not a huge amount) and carries additional administrative obligation. Sole trader is simpler, cheaper but exposes you to risk.
So, you need to figure out what the level of risk is likely to be. But there's nothing stopping you going ST to start with and establishing as a Ltd co' later on.
Other considerations to make that are often overlooked.....
If you were thinking of securing public sector contracts or clients, many public institutions tend to weight Ltd companies higher than sole traders.
And for some, there's the sense that a Ltd company is more 'proper'. This of course is entirely wrong and abstract but can be a powerful psychological thing for some.
Banks: I'd recommend Starling.
Insurance: Don't cut corners on this. Insurancejon on here is your friend in this regards
Advertising: Invest in a decent brand ID and content. Unless you're a graphic designer, don't attempt to DIY this. Get something created and creative that stands you out from what is a crowded environment. And don't rely on a single channel to promote yourself.
If you tell us roughly what it is you'll being doing (though I guess your user name might hint at this), we may be able to provide a bit more nuanced insight.
And what's the end goal? Are you looking to build something and exit later on....or simply to earn a living on your own terms.
Either way, best of luck with it!
It's swings and roundabouts; Limited protects you but will cost you more (not a huge amount) and carries additional administrative obligation. Sole trader is simpler, cheaper but exposes you to risk.
So, you need to figure out what the level of risk is likely to be. But there's nothing stopping you going ST to start with and establishing as a Ltd co' later on.
Other considerations to make that are often overlooked.....
If you were thinking of securing public sector contracts or clients, many public institutions tend to weight Ltd companies higher than sole traders.
And for some, there's the sense that a Ltd company is more 'proper'. This of course is entirely wrong and abstract but can be a powerful psychological thing for some.
Banks: I'd recommend Starling.
Insurance: Don't cut corners on this. Insurancejon on here is your friend in this regards
Advertising: Invest in a decent brand ID and content. Unless you're a graphic designer, don't attempt to DIY this. Get something created and creative that stands you out from what is a crowded environment. And don't rely on a single channel to promote yourself.
If you tell us roughly what it is you'll being doing (though I guess your user name might hint at this), we may be able to provide a bit more nuanced insight.
And what's the end goal? Are you looking to build something and exit later on....or simply to earn a living on your own terms.
Either way, best of luck with it!
Edited by StevieBee on Wednesday 22 July 14:01
It sounds like you want to be a courier. I'm a retired courier.
Sole Trader v. Limited was a financial decision. If profit will be more than around £30k, go limited, otherwise stay as sole trader. Limited brings a lot of expense that sole trader doesn't require.
It also depends on who you do work for. Work for individual members of the public will need public liability insurance. Work for other courier companies probably doesn't, as you will be covered on their policy. I never had it.
VAT is a biggy. If you work for a member of the public, you are 20% more expensive than someone who doesn't charge VAT.
If you work for a courier company, you can make an immediate 8% more money than someone who isn't VAT-registered by using the VAT Flat Rate Scheme.
You charge £100+VAT = £120
Your turnover is £120.
A courier is rated at 10% on the scheme, so you pay HMRC 10% of £120 = £12.
You have been paid, in effect £120 - £12 = £108
Sole Trader v. Limited was a financial decision. If profit will be more than around £30k, go limited, otherwise stay as sole trader. Limited brings a lot of expense that sole trader doesn't require.
It also depends on who you do work for. Work for individual members of the public will need public liability insurance. Work for other courier companies probably doesn't, as you will be covered on their policy. I never had it.
VAT is a biggy. If you work for a member of the public, you are 20% more expensive than someone who doesn't charge VAT.
If you work for a courier company, you can make an immediate 8% more money than someone who isn't VAT-registered by using the VAT Flat Rate Scheme.
You charge £100+VAT = £120
Your turnover is £120.
A courier is rated at 10% on the scheme, so you pay HMRC 10% of £120 = £12.
You have been paid, in effect £120 - £12 = £108
Hi,
I started out in a very similar way - just me, some people, no premises, and a few grand of kit. In Scotland the setup is basically the same as England, so a lot of what you read online applies, but here is the real-world stuff I wish someone had told me upfront.
Sole trader vs Limited Company
If you are doing anything where a mistake or accident could see you sued - damaged property, injury, bad advice, or even just a client claiming your work caused them loss - go Limited Company. I know it sounds "proper" and scary, but a Ltd company costs about £12 to register online at Companies House and maybe £150-£200 a year for a basic accountant. The reason it matters is that your personal assets (house, savings, van) are ring-fenced if someone sues the business. As a sole trader, you are the business. If you are van-based and visiting customers, the risk of scratching a car, damaging a drive, or a member of the public tripping over your kit is not zero. A Ltd gives you a legal wall between your business life and your personal life. For the cost, I would do it from day one. You can still pay yourself by taking a small salary and dividends, which is often more tax-efficient than sole trader income tax anyway once you get past the basic rate.
Name
Check the Companies House name availability tool even if you do not register a Ltd straight away. Also check that the web domain and basic social handles are free. It is annoying to print van signage and then find someone else owns the .co.uk.
Registration
- If you go Ltd: register at Companies House, get your certificate, then register for Corporation Tax with HMRC.
- If you go sole trader: just register as self-employed with HMRC. You will do a self-assessment tax return every year.
Banking
Open a dedicated business account immediately. Do not mix personal and business money. It is a nightmare at tax time if you do. Most high street banks and a few of the app-based ones (Starling, Monzo, Tide) offer free or very cheap business banking for small start-ups. Starling in particular is excellent for sole traders and Ltds, and the app handles receipts and invoicing quite well.
Insurance
This is non-negotiable. At minimum:
- **Public liability insurance** (usually £1m or £2m cover). If you damage a client's property or someone gets hurt, this covers you. Many clients and commercial sites will not let you through the door without seeing your certificate.
- **Professional indemnity** if you are giving advice, designs, or consultancy rather than just manual labour.
- **Tool and equipment cover** if your kit is expensive or essential.
- **Van insurance** that covers commercial use (social, domestic, and pleasure is not enough if you are travelling to jobs and carrying tools - your insurer can void a claim if they find out).
Expect maybe £200-£500 a year for a basic liability package, depending on your trade.
Advertising
A clean van with a phone number and website is the best advertising you can do. Seriously, it beats flyers. Get a simple one-page website (just who you are, what you do, contact details, and a few photos of your work). Google Business Profile is free and gets you on the map when people search locally. Word of mouth is king for van-based trades, so do a great job for your first ten customers and ask them to leave a Google review.
Training / qualifications
If your trade does not legally require an NVQ or apprenticeship, still think about getting a relevant short-course qualification or certification. Customers cannot tell a good tradesman from a bad one by looking, so certificates and accreditations are a shortcut for them to trust you. Also, some trade bodies and insurance underwriters give better rates if you have a recognised qualification.
Other things worth doing early
Get an accountant from day one, even if it is just a basic £30-50 a month package. They will save you more than they cost, especially on VAT registration thresholds and what expenses you can claim (van fuel, tools, insurance, phone, even a portion of your home bills if you do admin from home).
Invoicing: Do not do cash-in-hand work if you want to build a real business. Issue proper invoices with your Ltd company name, number, and registered address. It makes you look professional and keeps your books clean.
Record everything: Keep receipts for every tank of fuel, every tool, every insurance payment. Photograph them with your phone and upload to your bookkeeping app. HMRC can ask for records going back several years.
Pension: Once you are earning consistently, set up a director's pension. You get tax relief on the company contributions.
The bottom line
If you are just starting out, keep it lean. But do not be "cheap" on the legal structure and insurance. The £200 to become a Ltd company and the £300 for insurance could be the difference between losing your business and losing your house if something goes wrong.
Best of luck with it - starting out on your own is daunting but absolutely worth it once the work starts flowing.
I started out in a very similar way - just me, some people, no premises, and a few grand of kit. In Scotland the setup is basically the same as England, so a lot of what you read online applies, but here is the real-world stuff I wish someone had told me upfront.
Sole trader vs Limited Company
If you are doing anything where a mistake or accident could see you sued - damaged property, injury, bad advice, or even just a client claiming your work caused them loss - go Limited Company. I know it sounds "proper" and scary, but a Ltd company costs about £12 to register online at Companies House and maybe £150-£200 a year for a basic accountant. The reason it matters is that your personal assets (house, savings, van) are ring-fenced if someone sues the business. As a sole trader, you are the business. If you are van-based and visiting customers, the risk of scratching a car, damaging a drive, or a member of the public tripping over your kit is not zero. A Ltd gives you a legal wall between your business life and your personal life. For the cost, I would do it from day one. You can still pay yourself by taking a small salary and dividends, which is often more tax-efficient than sole trader income tax anyway once you get past the basic rate.
Name
Check the Companies House name availability tool even if you do not register a Ltd straight away. Also check that the web domain and basic social handles are free. It is annoying to print van signage and then find someone else owns the .co.uk.
Registration
- If you go Ltd: register at Companies House, get your certificate, then register for Corporation Tax with HMRC.
- If you go sole trader: just register as self-employed with HMRC. You will do a self-assessment tax return every year.
Banking
Open a dedicated business account immediately. Do not mix personal and business money. It is a nightmare at tax time if you do. Most high street banks and a few of the app-based ones (Starling, Monzo, Tide) offer free or very cheap business banking for small start-ups. Starling in particular is excellent for sole traders and Ltds, and the app handles receipts and invoicing quite well.
Insurance
This is non-negotiable. At minimum:
- **Public liability insurance** (usually £1m or £2m cover). If you damage a client's property or someone gets hurt, this covers you. Many clients and commercial sites will not let you through the door without seeing your certificate.
- **Professional indemnity** if you are giving advice, designs, or consultancy rather than just manual labour.
- **Tool and equipment cover** if your kit is expensive or essential.
- **Van insurance** that covers commercial use (social, domestic, and pleasure is not enough if you are travelling to jobs and carrying tools - your insurer can void a claim if they find out).
Expect maybe £200-£500 a year for a basic liability package, depending on your trade.
Advertising
A clean van with a phone number and website is the best advertising you can do. Seriously, it beats flyers. Get a simple one-page website (just who you are, what you do, contact details, and a few photos of your work). Google Business Profile is free and gets you on the map when people search locally. Word of mouth is king for van-based trades, so do a great job for your first ten customers and ask them to leave a Google review.
Training / qualifications
If your trade does not legally require an NVQ or apprenticeship, still think about getting a relevant short-course qualification or certification. Customers cannot tell a good tradesman from a bad one by looking, so certificates and accreditations are a shortcut for them to trust you. Also, some trade bodies and insurance underwriters give better rates if you have a recognised qualification.
Other things worth doing early
Get an accountant from day one, even if it is just a basic £30-50 a month package. They will save you more than they cost, especially on VAT registration thresholds and what expenses you can claim (van fuel, tools, insurance, phone, even a portion of your home bills if you do admin from home).
Invoicing: Do not do cash-in-hand work if you want to build a real business. Issue proper invoices with your Ltd company name, number, and registered address. It makes you look professional and keeps your books clean.
Record everything: Keep receipts for every tank of fuel, every tool, every insurance payment. Photograph them with your phone and upload to your bookkeeping app. HMRC can ask for records going back several years.
Pension: Once you are earning consistently, set up a director's pension. You get tax relief on the company contributions.
The bottom line
If you are just starting out, keep it lean. But do not be "cheap" on the legal structure and insurance. The £200 to become a Ltd company and the £300 for insurance could be the difference between losing your business and losing your house if something goes wrong.
Best of luck with it - starting out on your own is daunting but absolutely worth it once the work starts flowing.
treetops said:
Hi everyone,
Hope you can help here.
I m looking to start my own small business in Scotland.
Van
No premises
Just me working
What do I need to be thinking about?
Name of course
Business registration
Banking for business
Insurances
Advertising
Training for what I m going to be doing (I don t require an apprenticeship or anything of that nature)
And more
What I need to think about is being a sole trader or a Ltd company.
Bear in mind I ll be just starting out.
I won t be buying materials everyday like a joiner, plumber etc. might be.
There s some specific kit I need and after that it s my time.
Id be interested to hear some real world experience, rather than just Google and AI chat my answers.
Thanks very much!
Sounds like a locksmith or autoelectrician. Hope you can help here.
I m looking to start my own small business in Scotland.
Van
No premises
Just me working
What do I need to be thinking about?
Name of course
Business registration
Banking for business
Insurances
Advertising
Training for what I m going to be doing (I don t require an apprenticeship or anything of that nature)
And more
What I need to think about is being a sole trader or a Ltd company.
Bear in mind I ll be just starting out.
I won t be buying materials everyday like a joiner, plumber etc. might be.
There s some specific kit I need and after that it s my time.
Id be interested to hear some real world experience, rather than just Google and AI chat my answers.
Thanks very much!
The van will be the biggest expense and you need to decide whether buying or leasing is the best option.
Best thing to do is talk to an accountant.
48k said:
Sounds like a locksmith or autoelectrician.
The van will be the biggest expense and you need to decide whether buying or leasing is the best option.
Best thing to do is talk to an accountant.
Only if considering buying new, plenty of good used vans on the market, a lot depends on expected mileage .The van will be the biggest expense and you need to decide whether buying or leasing is the best option.
Best thing to do is talk to an accountant.
Doesitdrive said:
48k said:
Sounds like a locksmith or autoelectrician.
The van will be the biggest expense and you need to decide whether buying or leasing is the best option.
Best thing to do is talk to an accountant.
Only if considering buying new, plenty of good used vans on the market, a lot depends on expected mileage .The van will be the biggest expense and you need to decide whether buying or leasing is the best option.
Best thing to do is talk to an accountant.
I self-maintained a £1000 van. Others were leasing at £100 per week. Others bought on HP.
Some leases don't allow permanent sign writing.
Good guidance about going limited if you risk liability.
A lot depends on what your job will be.
Doesitdrive said:
48k said:
Sounds like a locksmith or autoelectrician.
The van will be the biggest expense and you need to decide whether buying or leasing is the best option.
Best thing to do is talk to an accountant.
Only if considering buying new, plenty of good used vans on the market, a lot depends on expected mileage .The van will be the biggest expense and you need to decide whether buying or leasing is the best option.
Best thing to do is talk to an accountant.
There are pros and cons of new vs used and pros and cons of buying versing leasing.
Hence recommendation to chat to an accountant. They will be able to look at the whole picture and advise Sole trader vs limited, buying verses leasing etc.
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