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If you’re registered as a sole trader, you must invest in an accredited accountant for sole trader businesses, who will register and file your Self Assessment tax returns each year.

What is a Sole Trader?

A sole trader is essentially a term for a business run by one person, but it can also be run as a team with no legal framework. So, as a sole trader, you are solely liable for debts the business may incur.

When someone leaves full-time employment to start out on their own, they will usually start as a Sole Trader. This is simply because getting set up to trade is the most straightforward way to start before operating via a limited company in the future.

Setting up as a sole trader

If you’re currently self-employed or planning to be soon, you should consider setting yourself up as a Sole Trader. When you register your business as a Sole Trader, you’re essentially agreeing to accept all financial risks of the business and will therefore be personally liable.

Suppose you’re on the fence and still deciding whether to set your business up as a Sole Trader or a limited company. In that case, it’s worth considering the key differences and benefits, such as tax advantages, before deciding.

Much like any other business, you must keep detailed records of your accounts, such as your income and business expenses. Hiring a chartered accountant and using reliable bookkeeping software can simplify this process and allow you to keep track of your expenses, receipts, and bookkeeping.

Contact our accountants for Sole Traders using the button below, and a dedicated accountant will be in touch soon.

Business name registration

Naming a business is one of the most exciting parts of starting a business for many people. You can even choose to trade under your own name if you’d like to trade as a self-employed individual. 

As a sole trader, you won’t be able to use the terms Public Limited Company (Plc), Limited Liability Partnership (LLP), or Limited (Ltd) in your company name.

For help with registering a company name, contact the TaxBite team below.

Tax for sole traders

HMRC uses the Self Assessment tax return system to collect taxes from self-employed individuals. In order to submit a Self Assessment tax return, you need to register with HMRC. This process can be taken care of by TaxBite, so click below to get in touch with us today.

Tax Return Submission Deadline

The deadline to submit your return for the previous year is the 31st of January. It’s also the deadline for any tax due from the previous tax year.

Tax Payment Deadline

The deadline for the current year’s second payment on account is the 31st of July.

Both payments must be considered when planning and improving your cash flow.

VAT registration

Any self-employed taxpayer with an annual income of £85,000 or more must also be VAT registered with HMRC. This means charging customers VAT on any eligible sales and paying this to HMRC when submitting your VAT return.

As a VAT-registered sole trader, you can reclaim the VAT you pay on eligible services and goods that were purchased for your business.

Special considerations

When you register your business as a sole trader, it’s worth considering sole trader insurance, specialist licenses and specific permission allowing you to operate in accordance with the law.

Income Tax Returns

Sole traders must pay income tax on their earnings each year. As part of our sole trader accounting services, we offer to manage your income tax returns for a fixed monthly fee, and this can also be done using simple bookkeeping software.

Pro‘s and Con’s of being a Sole Trader

There are pros and cons to every style of business. Sole traders have a few advantages and disadvantages that may rule the registration out. We’ve discussed each below.

The main advantages of setting up as a sole trader are:

The main advantage sole traders experience is that they have complete control over their businesses. This translates to quick resolutions and decisions. 

As the business’s sole owner, all profit belongs to the owner. Running your business as a sole trader also means that your accounts are not advertised to the public.

The reasons why sole traders are often successful are:

There are a few reasons sole traders tend to be successful such as being able to be more attentive to their customer’s needs and having the time to dedicate to building customer relationships. This, in turn, can help build rapport that translates to long-term, loyal customers.

The main disadvantages of being a sole trader are:

Probably the biggest and main disadvantage of registering your business as a sole trader is that you are accountable and liable for any and all debts the business incurs. If the business should fail, you may end up losing assets such as your home. This does, however, mean you remain in total control of your business.

If you’re looking to borrow large sums of money from the bank, you may face difficulties that you might not have faced had your business been registered as a limited company.

Sole traders may also notice that they don’t receive the same discounts that larger businesses are offered.

Sole Trader Frequently Asked Questions

Can you be a sole trader and be employed at the same time?

If you’d like to remain employed at the same time as running a self-employed business, you first need to check that the contract you have with your employer allows it.

It’s important to note that you must pay your own National Insurance and tax on any profits you make while in self-employment. This is done by submitting a Self Assessment return and declaring your employed pay via P60 and P11d forms.

How often does a sole trader accountant need to be used?

As a sole trader, you need to submit your accounts each year by law. Therefore, you must track your expenses all the time and submit the relevant returns on time. 

You should use a sole trader accounting specialist monthly to keep on top of this and ensure you’re remaining compliant with HMRC. Our accountants are specialists in sole trader accounts and limited companies and help ensure all the profits are processed correctly.

How much does a sole trader accountant charge?

The amount accountants charge sole traders largely depends on the size of the sole trader business and the services required. For smaller businesses, you could be looking anywhere between £45 and £300 per month, depending on the accountancy services you require, the scale of your business, and where you are located.

Get Started

If you are looking for reliable accountants to manage your sole trader accounts and tax matters, TaxBite offers an array of sole trader accounting options. Our accountants for sole traders can assist with business finances, business affairs, and regular tax efficiency reviews, as well as the typical accountancy services business owners generally require.

Your dedicated accountants can help you become more tax efficient and help turn your business into a successful business. Whether you’re a small business owner or a large business owner, we have an accountancy package to suit you.

Click below to speak to an expert advisor or one of our accountants for help with any of your accounting needs.

Why TaxBite Accountants

The TaxBite specialist accountants are experts in Sole Trader accounts while offering very competitive rates. The team work to ensure both large and small business accounts are filed correctly and on time, with the help of award-winning accounting software.

By choosing TaxBite, you will get your own dedicated accountant for sole traders, who will provide tax advice, file your annual Self Assessment with HM Revenue & Customs and Companies House, maintain accurate records of invoices and expenses, and offer an all-round top quality accounting experience with no hidden costs.

Our accountants specialise in managing year end accounts and other accounting services you may require. If you have queries relating to national insurance contributions, how much tax you should be paying, how your personal assets may be effective, or even what accounting software to use, we can help you today.