This month we are focusing on: Different Trading Vehicles to Consider for your business
And this week are looking at: What are the requirements for a sole trader at year end?
Becoming a sole trader is the simplest way to get your new business off the ground.
As a sole trader, you will have complete control over your business and finances. You can adapt quickly to any changes in your business, without having to concern yourself with a great deal of bureaucracy.
If you run your business as a sole trader, no distinction is made between your personal and business finances. It is therefore crucially important you realise that should anything go wrong with your venture, you will be personally liable for any business debts.
A sole trader is a person reporting what income and expenses they have earned in the last year.
The tax is based on the profits, not what the owner withdraws
Currently the only requirement for a sole-trader is to submit to HMRC a personal tax return, with a self-employment supplement once a year.
Moving forward this is expected to change with Making Tax Digital and the requirement to submit quarterly figure and end of year figures.
If you decide to go self-employed, you should register with HMRC. The advice is that you should register with HMRC within 3 months of starting to trade.
At any stage of the business cycle, if you look like you’re going to hit the annual VAT threshold over the coming 12 months, you must also register. The threshold usually rises by a few thousand each year, this year £85,000. Make sure you let HMRC know within 30 days, or risk paying a fine
As a sole trader, although your business income will be taxed alongside your personal tax, it is vital to keep your business records and finances separate from your personal affairs, so we we recommend you open a separate bank account for your business.
When you are in business, you are required by law to have certain insurance policies in place. This will depend on the industry you’re working in.
Keep accurate and up to date financial records, although there is no legal requirement to do so -it is best practice.
Once you start operating as self-employed, you will also need to pay not only any tax but your own National Insurance contributions (NICs).
If you know of a local business that needs help with business structure please do pass on our details
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