By PaperRocket Accounting, Nov 1 2019 03:57PM
If you’ve just set up your own sole trader business, or even if you’ve been doing it for a while and still aren’t quite sure what’s required of you, then this is the blog for you!
As a sole trader, of course, your main priority is going to be the day to day running of your business. Chances are, you’ve set up a business doing something you are passionate about, so of course, that is going to be your focus. However, it is important that you don’t neglect the legal responsibilities that you now have as a business owner. So, here is a rundown of what you need to ensure you take care of, to avoid falling foul of the law and taxman.
Register for Self Assessment
This is perhaps one of the most important requirements. As a sole trader, if you will be receiving income over the trading allowance (currently £1000), you will need to register as self employed and declare this untaxed income on an annual self assessment return. If you are not already registered for self assessment, then you will need to do so to let HMRC know to expect a return from you (and be issued with your own unique tax reference number to allow you to do so).
You can register for self assessment with HMRC here (either online or via a paper form).
This leads us on to our next responsibility…
Filing your self assessment return each year (and paying the tax!)
The self assessment year runs from 6th April to 5th April the following year. So, the 19/20 tax year is 6th April 2019 to 5th April 2020. Once registered for self assessment, you are then required to submit returns for the tax years to declare all personal income received for the year. You have until 31st January the following year (so 31st January 2021 for the 19/20 tax year) to submit your return and pay any tax due.
Self assessment returns can be complex, so it is always worth considering whether you want to employ an accountant to assist with the preparation of this.
Keep an eye on your turnover
If you make sales of £85,000 or more in any 12 month period (or expect to), then you are legally obliged to register for VAT. You will then be required to charge VAT on your invoices and submit VAT returns to HMRC to declare and pay any VAT due.
It is also worth bearing in mind that many sole traders choose to register for VAT even if they don’t reach that threshold, as once registered, you can then reclaim the VAT on any vatable expenses incurred.
Keeping business records
This requirement is so important, we’ve even written a separate blog on it!
Choosing your business name
For limited companies, this step is a requirement as part of the registration process with Companies House. Whilst you don’t need to register with Companies House as a sole trader, you will still want to choose a name for your business that you trade under. Many people may choose to trade under their own name, but some will want something perhaps a bit more unique. You just need to ensure that the name:
- Isn’t offensive
- Doesn’t include ‘limited’, ‘ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’ as these would allude your company structure to be different from what it actually is.
- Be previously trademarked (so always do your research on any name you choose to make sure it’s not already in use).
- Contain any sensitive words or words that could imply a connection with government (unless previous approval has been granted).
Whilst it is certainly not a legal requirement, many sole traders also like the security of using a cloud accounting software (such as FreeAgent), as well as employing an accountant to help ensure that all their accounting responsibilities are met on time, and correctly.
PaperRocket Accounting provide accounting and tax services to professional contractors and freelancers working in the UK.
We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.
Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.
We pride ourselves on our client satisfaction and customer service and were awarded 'Welwyn Hatfield Business of the Year 2019' in the SME Hertfordshire awards. We were also finalists for 'Best Contractor Accountant 2019' in The Contracting Awards, 'Small Practice of the Year 2016' in the AccountingWEB practice excellence awards, as well as FSB Hertfordshire Service Excellence finalists in 2015 and 2016.
To find out how we can help you please get in touch now.