If you’re starting out in business, operating as a sole trader may be the ideal way for you to start and test the waters, without all of the red tape and statutory filing that comes with running a Limited Company. However a Limited Company will offer you certain protection as it operates as a separate entity to the individual .
Beware! As a sole trader if things don’t work out, it is you who is responsible for the debts.
From the day you start as a sole trader, the very latest you can register with HMRC is by 5th October after the end of the tax year during which you became self- employed. You can register here . You will then be issued with your Unique Tax Reference (UTR)
When Is The Year End
Your business year end will typically tie in with the tax year end, for most this will be the 31st March. So when do you need to file? The tax year runs 6th April -5th April. If you become self employed between these two dates you need to file a tax return for the year end April that comes after your self employment commenced.
Bookkeeping, it may be time consuming but it is necessary so make time for it, these are your records of your business transactions and your proof should HMRC want to query anything.
Taxation – this is where you may benefit from the advice of an accountant. There are two key areas to consider…
For some, starting out may mean that you stay in employment, your income from the sole trader and employment will be totalled together, the implication of this is that while you will make use of your personal allowance, your total income may push you into higher tax band.
National Insurance, you will be liable for two types of National Insurance contributions, your accountant will be able to advise you on how this was calculated, what you owe, and the breakdown of the figure.
If you’re a sole trader who has enough on their plate establishing their business, making contacts, meeting clients and developing products. Maybe it’s time to call Avanti (08000) 388 799 to see how we can help you move your business forward!