Can a sole trader employ staff? Yes, you can hire employees without forming a limited company, provided you remain the sole owner of the business. This arrangement allows you to keep all profits and trade under your own name, but it introduces new responsibilities. The individual running the business remains personally liable for its actions, yet that liability does not stop you from taking on a team.
Registering as an Employer
You must register with HMRC to handle employee income tax payments. Submitting a PAYE registration form enables you to deduct income tax and National Insurance contributions from your workers’ paychecks. The registration process should be completed before the employee’s first payday to ensure compliance with tax laws.
Legal Requirements and Protections
Before hiring, verify that every prospective employee has the legal right to work in the UK. They must hold a valid passport or prove EEA citizenship. The GOV.UK online checker can help you quickly verify this status. Hiring someone illegally can result in a fine of up to £60,000 per employee, making this check a priority during the recruitment process.
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When you finally hire a team member, you must issue a written statement of employment if they work for more than one month. This document outlines their job role, pay, and hours. You must also ensure you are paying at least the national minimum wage. As of April 2026, the rate for workers aged 21 and over is £12.71.
You need to register as a sole trader if you have earnt £1,000 from self-employment in one financial year. This registration is a separate administrative step that must be handled by the individual owner, distinct from the employer duties required once staff are hired.
