Can a sole trader employ people?

Answer 1

Yes. The status of sole trader means that the tax paid is all calculated part of YOUR income tax each year, you do not have to keep separate company books. Therefore your business expenses (including salaries of any people you employ or contract) come out of your earnings and are offset against your tax (you are therfore taxed on the profit you make). You MUST however keep clear receipted records and would be liable to any national insurance or tax payment you must make by law as an employer.