Sole Trader advice

Do you presently trade or are you thinking about beginning a business as a lone proprietor? Cruseburke Accountants can assist because we are a 'one-stop-shop' for accountancy services and tax guidance for sole trader and self-employed professionals.

Starting a business as sole trader

If you are self-employed or intend to become self-employed in the near future, you should consider establishing yourself as a single trader. According to the UK Government, sole traders account for 76% of all small companies in the country. A single trader is an individual who operates by themself.

You agree to incur personal financial risk when you register as a lone trader. Because your company is not a separate legal entity, you will be personally accountable for any debts or legal action taken against it. This varies from a limited corporation, in which business owners have only limited liability.

Whether to incorporate as a limited company or not is a critical issue for every business owners. There are several significant distinctions, including tax advantages when converting your firm from a sole trader to a limited corporation. More information on limited companies can be found here.

If you determine that being a single trader is the best option for you, keep in mind the tax implications when you register as self-employed. Depending on your annual revenue, you may also be needed to register for VAT.

When working as a lone trader, you should keep accurate records of all your income and spending, just like any other firm. Invoices, receipts, and costs can be easily logged using basic bookkeeping software. This makes it easy to file your self-assessment tax return with HM Revenue and Customs (HMRC), which is a legal requirement for all sole trader.

If you're still working out how to set up as a sole trader and defining your business concept, we can assist you with finalising a complete business plan. This serves as a road map for your new venture and can provide clarity and assurance for sole trader seeking business credit from banks or alternative finance lenders.

Registration of a company name

Functioning as a best accounting service for sole trader is less formal than operating as a limited company when it comes to registering a business name. In reality, you can choose to do self-employment under your own name rather than a business name. You can still register a solo trader business name if you so desire.

Just keep in mind that as a sole trader, you cannot use the following terminology to describe your business:

• Public limited corporation (Plc)
• Limited
• Limited liability partnership (LLP)

Using these terminology would misrepresent your self-employment as having a separate business status.

A lone trader business name should be carefully considered and cannot contain trademarked terms or phrases.

Sole trader tax

HMRC uses self-assessment to collect income tax and National Insurance payments (NICs) from self-employed profits. You will need to register with HMRC for self-assessment, which Cruseburke can assist you with.

The following are the significant dates for lone proprietors' tax returns and payments:

31st January

The deadline for submitting a tax return for the preceding year is January 31st.

The deadline for paying the balance of taxes owed for the previous year and making the first payment on account for the current tax year.

31st July

The deadline for making the second payment on account for the current tax year is July 31st.

It is critical to evaluate the impact that these account payments can have on cashflow. Next your first year as a sole trader, you may be compelled to pay 150 percent of your tax for the first year by the following 31st January and another 50 percent by the following 31st July.

It is critical to keep precise records of your sales and expenses in order to present an accurate estimate of your annual earnings. Our bookkeeping services can take care of all the details, allowing you to focus on developing your business. You'll have peace of mind knowing that you're paying the proper amount of tax - at the right time – if you utilise a competent Cruseburke Accountant.

If you are a self-employed subcontractor in the construction industry, the Construction Industry Scheme (CIS) has particular tax rules that govern how contractors must handle payments. Unless they register for gross payment status, your contractors as a sole trader subcontractor may be obligated to withhold income tax at a rate of 20% from your invoices and pay it straight to HMRC. However, you will still be in charge of maintaining and organising proper self-assessment tax returns on a yearly basis.

Registration for VAT

If you expect to make £85,000 or more as a sole trader, you must also register for VAT with HMRC. As a VAT-registered sole business, you must charge consumers VAT on all qualified sales and remit this to HMRC when filing your VAT returns.

Being VAT-registered has advantages, such as the ability to reclaim VAT on qualified goods and services purchased for your business.

Particular considerations

When registering a single trader firm, you may also need to consider sole trader insurance, as well as specialised licences or licences to operate legally. Self-employed taxi drivers, for example, must have either a Hackney Carriage licence or a Private Hire Vehicle (PHV) licence.

Meanwhile, if you want to test the waters as a street seller, you must first seek a licence from your local municipality. If you're just starting out in the catering profession, you'll need to get your premises inspected and approved before you can offer meals to the general public.