Sole Trader

Did you know that the most popular way to start up a new business is to do so as a sole trader?  There are a staggering 2.8 million sole traders in the United Kingdom alone, but I wouldn’t be surprised to find out that many people aren’t actually sure what a sole trader is.

The following list shows some of the key features of sole traders - if you want to become a sole trader then you should know all these aspects;

Tax - As a sole trader both your personal and business finances are bundled together for tax reasons.  This is compared with the limited company world were such finances are kept separated.

Self-Assessment - As a sole trader you are legally bound to be taxed under self assessment rules.  This means that you must fill out a tax return each year showing all the money you have made - this helps the country take as much as they can from you!

HMRC - You should register with Her Majesty’s Revenue and Customs as soon as possible.  Failure to do so could lead to a fine so get on top of the situation as soon as possible.  Once registered you can start trading immediately.

VAT - If you are aware that your business is going to turnover £68,000 or more per year than you must legally register for VAT.

Paperwork - One of the benefits of going down the sole trader route is that you don’t have to worry about all the paperwork that limited companies have to fill out.  Therefore there is less administrative business to deal with meaning you can get straight to the business much faster.

Responsibility - If things go pear shaped then unfortunately you are going to be responsible.  Any financial liabilities incurred fall on your shoulders and there is no difference between business assets and personal assets - they’ll take your big screen TV basically!

Another Chance - Just because you start up as a sole trader you don’t have to worry about having to stick to that path forever.  If you decide later on down the line you can decide to become a limited company.

Contributions - Sole traders are responsible for contributing towards their own income tax (PAYE) and national insurance from their business profits.

Whether starting up as a sole trader is the right move for you or not you should spend some time doing research to see if it is what you want to do with your business or not.

There are many ways to start a new business - you can seek help online or you can get in contact with Her Majesty’s Revenue and Customs through their helpline on 08459 15 45 15.

Sole Trader?

Are you a sole trader?  Would you advice anyone to go down the same path as you?  Would you turn people off the idea?  Let us know your experiences by leaving a comment…

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