The term Sole Trader in a business sense does not necessarily mean that only one person works in the business. This business format is reported on to HMRC using the self-assessment form and is taxed under income tax rules.
With this business format, you and the business are classed as the same legal entity.
For a free one hour consultation on whether this is the best business format for you, please call 0845 680 2502 and ask to speak to Joanne.
Starting your business : When you start trading, you must inform HMRC. They will give you a UTR (Unique Tax Reference) if you do not already have one, and expect a self-assessment tax return to be submitted. You must inform HMRC within three months of starting to trade.
HMRC Tax Return: Sole trader businesses must submit a self-assessment tax return annually. You can use the HMRC software to submit this return (commercial software is available), or in limited circumstances, you can still submit a hard copy return. The tax year ends on the 5th April and you must submit your return by 31st January the following year. All taxes due must also be paid by the 31st January of the following year. Late submissions attract penalties and late tax payments attract penalties and interest.
Payments on account are required to be paid to allow HMRC to collect taxes during the year, as you are earning the taxable profit. These are based on the previous year's profits' unless you apply for a reduction (interest will be charged on underpayments where you apply to reduce the payment on account and profits exceed the original assessment). The first payment on account is due on the 31st January and the second on the 31st July. So in the first year, you will not pay any tax until the 31st January following the assessment year, but you will be liable to 150% of the tax due at that time. For further information on which business expenses are tax deductible and when taxes are due, please call 0845 680 2502.
PAYE: You can be an employer when you have a self-assessment company. This is for employees working in the business other than yourself.
All employees working in your business need to be on your payroll. You will pay them a salary for the work they do in the business (tax and NI will be deducted according to PAYE rules).
VAT: You are required to register for VAT if you have made taxable supplies over £73,000 in the last rolling 12 months or expect to go over £73,000 in the next 30 days. There are several different VAT schemes that you can choose. For help choosing the one which helps you keep more of money that you earn. Call 0845 680 2502