So you’ve had enough of being on the treadmill working for someone else and decided it’s time to break free and go solo.
The good thing is you’re not alone as the number of sole traders, which are classed as businesses with no employees, grew 25% quicker than any other business in 2017.
Once you become a sole trader, you’re in charge of your own business and responsible for all losses the business makes as well as paying all taxes to HMRC.
The plus side is that once all your taxes are paid, you get to keep all your business’ profits – but first you need to know how to set up as a sole trader.
How do I name my sole trader business?
Choosing a unique name for your business is a vitally important early step in the process of setting up as a sole trader.
Your business’ name must not be the same as an existing trademarked company. It also shouldn’t be deemed offensive or include any mention of being a limited company, an LLP or a PLC.
An inspired example of a business owner getting their creative juices flowing for the naming process came in the form of our own Devon-based carpet cleaner – Spruce Springclean!
How do I register as a sole trader?
The second thing to do, if you haven’t done this already, is to register for self-assessment and to pay class 2 national insurance contributions (NICs) with HMRC.
You can register with the Revenue online, where you’ll receive a 10-digit unique taxpayer reference and be registered for self-assessment at the same time.
Do I need to keep records as a sole trader?
It’s essential you keep records of all your business sales and expenses for the purpose of sending in your self-assessment tax return by 31 January every year.
This will help you or your accountant calculate your business’ annual profit or loss, as well as enabling you to produce hard evidence if HMRC ever demands it.
It’s wise to keep all receipts, bank statements and invoices (among other things) for at least 6 years.
What are my tax responsibilities as a sole trader?
As previously mentioned, you’ll need to submit a self-assessment tax return each year to pay any income tax and NICs you owe during the previous financial year.
You may also need to register for VAT if your taxable turnover is more than £85,000, although you can voluntarily register if you want to reclaim VAT from sales to other VAT-registered businesses.
Get in touch
If you want to discuss setting up as a sole trader, you can contact us on 01363 773191 or email firstname.lastname@example.org for more information.