Starting out as a sole trader, aka a one-man band can be both scary and exciting!
You have done your training, may have years of experience, the business idea is born and then…. all systems go! Suddenly you find yourself responsible for bringing in the money, marketing, maybe looking after your website, “doing” the books and making the tea. As well as trying to live a life. As the saying goes, “You work to live” and NOT the other way around!
WHAT DOES BEING A SOLE TRADER ACTUALLY MEAN
In real life, a Jack of All Trades and Master of Many – make no mistake about that. You have taken that leap to become self-employed! (Congratulations!)
However, in terms of business speak – HMRC recognises you as being in business for yourself. As we have said, it is exciting, it is scary, but as accountants, we are here to help you with the “official” side of thing, along with the financial elements.
So, first things first.
Register with HMRC. Keep on the right side of the tax man at ALL times
From the word go, it is important to start out and keep the correct financial records.This means ensuring that if you create and send out invoices, they are numbered and preferably professionally produced. (Software such as QuickBooks and Kashflow) make this simple for you. Keep details of expenses – mileage, lunches, stationery. If you are not sure – ASK US.
You are required by law to submit returns to HMRC to confirm your taxable income. – at present once per year in the annual tax return, with Making Tax Digital – 4 times plus the annual tax return.
When you work for an employer, your national insurance Contributions are paid for you but as a sole trader you will need to ensure that payments are set up to pay Class 2 and Class 4 National Insurance Contributions.
VAT – the VAT threshold is currently £85,000 per annum. If your business exceeds this level of income, then registration is compulsory along with digital record keeping using cloud accounting software that is compatible with HMRC. We have much more information on that on our website. Have a good look around our Making Tax Digital page and shout out with any questions or concerns
Look after your health as all this can be challenging. Remember, “You can’t pour from an empty cup”!
With over 30 years’ experience between us, the team here at ACG have worked with many sole traders and seen them grow their businesses, very successfully. We really do pride ourselves on being approachable. Well, anyone that works from a garden shed (er, albeit rather lovely, with birdsong in the summer and a fire in the winter), can’t be that scary!
If you would like some help and advice about starting out or growing your business as a sole trader, please do get in touch. Your invitation to the shed is always open!