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Division B8.1ÌýÌýÌýÌý Tax treatment of sole traders

For updates affecting this Division please see Part B0 Updates

Basis of taxation for sole traders

B8.101 Basis of taxation for sole traders—overview

When one or more individuals decide to start a business, they have a choice as to what type of entity they want to run the business through. Alongside the commercial and legal reasons for that choice, the tax treatment of each different form of vehicle will often be a decisive factor in whether it is appropriate for carrying on a particular business. If a person chooses to operate as a sole trader any profits are included as part of their taxable income at the income tax rates that apply to non-savings and non-dividend income (known in practice as non-savings income). See E1.101E.

Once the trading profit/loss for the sole trader have been drawn up to the accounting date they are adjusted for any relevant tax adjustments