In the UK there are around 3 million sole traders; this is the most popular and easiest way of setting up a business, it is also the most straightforward structure for a business.
As a sole trader it is necessary to register with HMRC, this way you can start trading right away. Should you delay, there is a chance you could incur a penalty. At Taxfile we offer the service of registering you with HMRC so you have a complete stress free experience.
As a sole trader you are required to fill out a tax return every year, which states the details of the money you have made as well as any expenses. The latest online submission date for tax returns is 31st of January.
By law you are required to keep records of any invoices, receipts and bills that you use on your tax return for 6 years.
Very important to remember is that as a sole trader you are personally responsible for any losses the business makes.
As a sole trader you will pay national insurance contributions as well as income tax (PAYE) on any of your business profits. If at any point in any 12 month period your turnover reaches the VAT registration threshold, £85,000 from the 1st April 2020, you must register for Value Added Tax. At Taxfile, we will also be to help you register for this, if you business should need it.
To stress there is no right or wrong way to set up a business structure- it all depends on what you do, your financial situation, and how large your business is likely to become.
If you require any of our services about what you have just read from Taxfile, please do not hesitate to call us at our south London office.