Sole traders

Sole traders

If you are looking for a sole trader accountant, you have come to the right place, If you run a business in your name (for example a baker, beauty salon, carpenter, IT consultant, artist, influencer or locum). This is a simple business structure. All you need to do is set up a business bank account, pick an accounting period (1 April to 31 March is the easiest) and start trading.

So long as your turnover doesn't exceed the VAT threshold, 10 months after the year end, you report your profits to HMRC by completing an online tax return and pay income tax and national insurance contributions on these profits.

Sounds easy, why don't I just do this myself?

You could end up paying too much tax
Think about it, if HMRC wanted you to take advantage of all the tax breaks, they would prepare the return for you!

Making mistakes will be costly
In the long run, filing late, missing payment deadlines and making mistakes will cost you money. HMRC come down hard on errors and will push to charge you the highest penalties possible.

How we can help you

Notify HMRC you have started trading
We will take care of all the paperwork

Take care of your sole trader bookkeeping and accounting obligations
We use the latest technology, cloud accounting, so you have a digital record of your financial transactions. You will need to provide this to HMRC if they open a tax investigation

Complete your self employed tax return
We are professionally trained, have years of experience and keep current with tax legislation changes. This ensures your tax return is submitted accurately.

Work out your tax payment/refunds and tell you when the payment must be made
We will set you up on your very own portal. You can review and approve everything from your phone

Sole trader FAQs

How to register as self employed

You need to complete an online registration form on the HMRC website. You must do this within 6 months of the year end in which you become self-employed. HMRC will then send you a Unique Taxpayer Reference (UTR) within 10 days. As part of our service, we will take of this process for you. As tax agents, we are in a position to speak directly with HMRC on your behalf.

What are the advantages/disadvantages of being a sole trader

Advantages: Privacy (you don't to publish your accounts), simpler taxation regime, only have to do your taxes once a year, fewer record keeping requirements and lower accountancy fees.

Disadvantages: Difficult to raise capital, cannot attract external investors, unlimited liability and higher rates of tax.

What tax does a sole trader pay

Income tax and National insurance contributions. We have a sole trader tax calculator that we use to easily work out what you must pay.

Self employed tax payment dates

31 January and 31 July. There are effectively 3 payments a year. The balancing payment for the 5th April tax year is made on January 31. Two additional payments are required, equivalent to the current year's tax, in respect of the following year. One payment is made on 31 January and the other by 31 July.

Self employed expenses

You can claim a tax deduction for most expenses you incur running your business subject to some exceptions.

1) Most expenses are tax deductible such as goods bought for resale, storage costs, staff costs, light and heat, advertising, telephone, broadband, rental costs, accountancy fees, insurance, general overhead expenses - the list is endless.

2) If there is some duality of purpose, for example, using a car for personal use aswell as for business use. Then you cannot take a full deduction and must "disallow" the private use element in your tax return. This is by its very nature subjective and HMRC could challenge the adjustment (in their favour of course!)

3) Certain costs are specifically not tax deductible and these include, but are not limited to, client entertainment, business gifts, goods purchased for private use, home to work travel costs, fines, penalties and capital expenditure.

Can I employ staff

Yes - it is a simple matter of registering a PAYE scheme in the name of your business and making monthly RTI submissions. We can manage this on your behalf.

What is making tax digital

HMRC are bringing in big changes from 2023. At a high level, this means having to report your profits/losses every quarter. There will be a greater emphasis of real-time reporting and publishing invoices/expenses. The exact details will emerge over time, but it is expected in the first stages, payments will also be made each quarter. Not the official line, but the self-assessment system could ultimately replicate the PAYE system - monthly payments of tax to HMRC.

How do I transfer my sole trader business into a limited company

The process is relatively simple but there will be some admin work involved. From a tax perspective, you are selling/transferring the business and this constitutes a capital disposal. The final tax position depends on your personal circumstances and we can manage this process for you.