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A Sole Trader means you are a one-man-band as self-employed. You don’t have a boss!
When earning as a Sole Trade, any profits you make are personally yours, but also if things were to go wrong then any liability is personally yours too.
You will need to register with HMRC as self-employed and complete Self-Assessment Tax Returns each year.
Once that is done you’ll need to keep records of your business income and any expenses so that you can accurately complete a tax return each year. This is considerably easy if you use cloud-based software such as Xero, Quickbooks, Kashflow or FreeAgent.
Your tax return will then determine how much income tax you must pay as well as the amount of National Insurance contributions you’ll owe.
As you grow and your turnover increases then you may need to be VAT registered. You must register for VAT if your turnover exceeds £85,000. You can choose to be voluntarily VAT registered before your turnover reaches the threshold which may be beneficial if you are selling to other VAT-registered businesses and wish to reclaim VAT.
For some sole trader businesses you may need a special permission or license from your local authority for example childminders and restaurants etc. So make sure to do your research when setting up!
Happy business planning and Sence wish you every success in your new venture!
Without a doubt, the association we have with Sence Accounting has been outstanding due to the forward thinking nature of the whole team matched by their highest level of professionalism.
Edward Hands and Lewis