Sole trader, often also referred to as self-employed, describes a business that is owned and controlled by one person.
The business may have several employees and consultants. Individuals providing a personal service quite often set up as a sole trader. For example, plumbers, electricians, builders, hairdressers, civil engineers, gardeners, photographers etc. Sole traders, owner of the business, are personally liable for the debts of their business and may be required to settle the debts of their business out of their own personal resources. Hence sole traders may have an unlimited liability. There are ways of mitigating a sole trader’s liability. We strongly advise that you seek professional assistance in this matter before setting up as a sole trader.
A few of the advantages of being a sole trader:
- It is easy and quick to set up.
- Suits most small business ventures.
- You are your own boss and in control of your time.
- It is a great way to try out “that business idea you have secretly nurtured”.
- Fit the business around your time availability.
- Could have a small initial start-up cost and capital requirement.
- Some of these sole trader businesses may be started and run from home, hence low running costs.
- Sole traders have the general overall control due to the hands-on approach to running of the business. They can make decisions promptly without the sluggish nature of hierarchy of a larger business structure.
A few of the disadvantages of being a sole trader:
- The risk of unlimited liability to settle business debt.
- A sole trader has no one to share the business responsibility of running of the business.
- The very nature of working as self employed, by your-self, can get a bit lonely for some.
- It is difficult to take holidays or time off whilst ill, as there will be a loss of income.
- A sole trader has to be resourceful with several skill-sets if they are to survive competition.
Sole traders tax advice and National Insurance Contributions (NIC) considerations:
- Self-employeds are liable to income tax on profits and is required to keep records of business income and business expenses
- A self-assessment registration is required of an individuals trading as sole traders
- filing of a personal tax return on an annual basis; this is done on strict HMRC deadlines, otherwise penalties apply
- Personal tax on a sole trader business is normally payable in two instalments, with certain exceptions
- A sole trader may be liable to a Class 2 National Insurance Contributions (NIC)
- Class 4 National Insurance Liability (NIC) is chargeable on profits above a certain level of a sole trader business profits
Our Sole Trader Tax and Accountancy expertise can be provided as an individual service or may be combined with other tax and accountancy related services as part of an annual package that we can offer as your appointed Accountants and Tax Advisers. We can assist you with your sole trader accounts preparation, filing of your sole trader self-assessment tax return and any help with sole trader taxes.
For well over 20 years we have served as Sole Trader Accountants and Tax Advisers to Brighton, Copthorne, Crawley, Croydon, Eastbourne, East Grinstead, Gatwick, Godstone, Haywards Heath, Horley, Horsham, Hove, Lingfield, London, Oxted, Redhill, Reigate, Tunbridge Wells, Turners Hill, Worthing and most of Surrey and East and West Sussex, and now service most of Greater London.
Call us for an immediate appointment for the authoritative Sole Trader Tax advice and Accountancy help or any tax and accountancy related matter.