Sole traders in the construction industry
A sole trader is an individual who establishes their own business in which responsibility for the running and operation of the business is theirs alone. The individual may employ others but they remain the sole owner of the business.
This is generally considered to be the simplest way of running a business, with relatively simple accounting processes. However, the individual is personally liable for any debts which may accrue and, for businesses that require a lot of investment, it can prove a risky venture.
Sole traders may have to register for the Construction Industry Scheme (CIS) if they are working in the construction industry as a subcontractor or contractor. The CIS sets out a series of rules for how contractors should make payments to sub-contractors.
Sole traders will need to keep records of the business’s sales and expenses; send an annual Self Assessment tax return; pay income tax on any profits; and acquire Class 2 and Class 4 National Insurance. They may also need to register to pay any VAT.
There are two forms of sole trader:
- Sole proprietor.
- Sole practitioner.
A sole proprietor is usually a trader selling physical products to customers. A sole practitioner is usually a professionally-qualified person selling services to clients.
For example, architects can practice as sole traders, either with employed staff or entirely alone. Many architects choose this form of practice, attracted by the freedom of conducting their own business, on their own account. This is considered by some to be one of the hardest forms of practice, as they can feel isolated from fellow professionals.
Advantages:
- Autonomy at work.
- There are few formalities to setting up and operating as a sole trader. This can keep costs down and increase profits.
- The sole trader can make immediate decisions, as there is no need to consult with other parties.
- The business belongs to one individual thus all profits belong to that person.
Disadvantages:
- High risk.
- Difficult to keep up with changes in practice.
- If the business fails, all debts would have to be met by the trader's personal assets.
- As a small business, sources of finance may be difficult to obtain compared with larger businesses.
[edit] Find out more
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
A threat to the creativity that makes London special.
How can digital twins boost profitability within construction?
The smart construction dashboard, as-built data and site changes forming an accurate digital twin.
Unlocking surplus public defence land and more to speed up the delivery of housing.
The Planning and Infrastructure bill oulined
With reactions from IHBC and others on its potential impacts.
Farnborough College Unveils its Half-house for Sustainable Construction Training.
Spring Statement 2025 with reactions from industry
Confirming previously announced funding, and welfare changes amid adjusted growth forecast.
Scottish Government responds to Grenfell report
As fund for unsafe cladding assessments is launched.
CLC and BSR process map for HRB approvals
One of the initial outputs of their weekly BSR meetings.
Architects Academy at an insulation manufacturing facility
Programme of technical engagement for aspiring designers.
Building Safety Levy technical consultation response
Details of the planned levy now due in 2026.
Great British Energy install solar on school and NHS sites
200 schools and 200 NHS sites to get solar systems, as first project of the newly formed government initiative.
600 million for 60,000 more skilled construction workers
Announced by Treasury ahead of the Spring Statement.
The restoration of the novelist’s birthplace in Eastwood.
Life Critical Fire Safety External Wall System LCFS EWS
Breaking down what is meant by this now often used term.
PAC report on the Remediation of Dangerous Cladding
Recommendations on workforce, transparency, support, insurance, funding, fraud and mismanagement.
New towns, expanded settlements and housing delivery
Modular inquiry asks if new towns and expanded settlements are an effective means of delivering housing.