Our experts at DSR Tax Refunds want to make life easier for you. After all, it can be hard work enough setting yourself up in business as a sole trader without having to work out what to do about your taxes and so on. That’s why we have created this helpful guide to lead you through the process. Our friendly team are always at hand to help you make your taxation matters as easy as possible, so call us on 0330 122 9972 and let us make things simple for you.
The basics of being a sole trader
If you are starting up a new business, setting up as a sole trader is the simplest and easiest way of doing it – after all, it is just you and there’s no one else to worry about. It’s considerably easier as well as cheaper than setting yourself up as a limited company – but it does have its drawbacks too. Limited companies have a certain amount of protection against failure, unlike sole traders who would be responsible for any debts if the business were to fail.
It’s really important to register with HMRC if you set up as a sole trader – if you start doing business without letting them know, you could be in for a nasty shock in the form of fines and penalties. You don’t need to register with Companies House, but you might choose to anyway. When you register with HMRC, make sure that you register for self-assessment too. Even if you don’t make an awful amount of money in your first few years, you will still need to tell HMRC about your earnings.
Unless you are likely to be turning over more than £85,000 per tax year, you don’t need to register for VAT (with the odd exception) but it can have its benefits – call our experts on 0330 122 9972 if you want advice on this.
What are the risks of being a sole trader?
As we have said, it is the simplest way of trading but it doesn’t come without risks. Some of the more common risks include:
- You are solely responsible for the success or failure of your business, including any losses it makes or any claims that unhappy customers may make against you. These debts will be yours, rather than the company’s
- You alone are responsible for your accounting and HMRC are going to want to see that you are keeping good business records and accounting for your business correctly.
- If you don’t register with HMRC as a sole trader within 3 months of trading, you could end up with a penalty.
You can minimise some of your risks by getting good business insurance. It is often a good idea to set up a separate business account too so that you can keep your business and personal finances separate.
What business records will you need?
Because you will be responsible for filing your own self-assessment tax returns, you will need to start keeping your paperwork in a safe, accessible place. invoices, receipts, bank statements – you will need all of these so make sure you can lay your hands on them. You might find that it is useful to have some kind of basic accounting software too.
We at DSR Tax Refunds know how complicated your self-assessment tax returns can get when you are running your own business and that is why we offer a self-assessment return service, so you can be sure that you are paying the right amount of tax you owe – but not a penny more than you need to. Call our team of experts on 0330 122 9972 and let us make life simpler for you. We deal with HMRC on your behalf so you have no need to worry, it’s all taken care of.
This page was last updated on 24/10/2018.