Our comprehensive sole trader accountancy will make running your self-employed business easier than ever before. Whether you’re just about to start your self-employed journey as a sole trader and need help registering on the government’s website, or you’re a seasoned professional looking for an accountant to help with bookkeeping and HMRC filing – we have you covered. Our service includes everything you need to succeed, including completion of year-end accounts, tax return assistance, bookkeeping, tax advice, reminders for important filing deadlines, and more! We can also help you register for VAT if your business’s turnover exceeds £85,000.
To find out more about our sole trader accountancy and how we can provide you with unrivalled value and assistance, please call 0800 229 4020 or complete the short form on this page. Please keep reading for more information about being a sole trader in the UK and why Fusion Business Services should be the first provider you contact if you’re looking for a trustworthy and compliant accountant.
What are the responsibilities of a sole trader in the UK?
Being a sole trader is generally regarded as the easiest way to run a business in the UK. For example, there is a lot less administration and legal obligations compared to setting up and running a limited company. However, to remain compliant with HMRC and to ensure you pay the correct tax and National Insurance, sole traders still have several important responsibilities, including:
- Registering online (government website) to let HMRC know you’re running a sole trader (self-employed) business. You need to register once your business generates over £1,000 in a tax year.
- Keeping and filing business records to HMRC.
- Bookkeeping.
- Invoicing clients and chasing payments/paying bills, and settling outstanding payments.
- Recording business expenses.
- Submitting a personal tax return.
- Paying income tax and National Insurance Contributions.
- Registering for VAT if your business turnover exceeds £85,000 in a tax year.
- Consider registering with the Construction Industry Scheme (CIS) if you work in construction.
Fusion Business Services can help you register as self-employed and provide a compliant, ongoing accountancy service. Please call our friendly Sales Consultants (0800 229 4020) for a free consultation to discuss your circumstances and how we can help your business thrive.
Advantages of operating as a sole trader
Over 50% of UK businesses in the private sector are run by self-employed professionals (over 3 million). It’s exceptionally popular to run a business as a sole trader, and hiring a specialist sole trader accountancy practice will make it easier than ever before.
Here are some advantages of being a sole trader in the UK:
- Registering as a sole trader is easier than other business setups (such as becoming the director of a limited company).
- You can start a business quickly and can start working on projects immediately.
- Most sole traders have minimal business overheads making it a cost-effective way to operate.
- Sole traders have complete control over their business finances, and you are your own boss. You can choose which work to accept and reject, and you don’t need to report to anyone, such as a senior staff member.
- As the sole owner of your business, you get to keep all of the profits you generate and don’t need to distribute any dividends to shareholders (which you might need to do if you are the director of a limited company).
- Sole traders have far fewer tax responsibilities than limited company directors. As your business is not incorporated, you will not need to pay any Corporation Tax or submit annual accounts to Companies House.
- Following on from the point above, as sole traders have fewer responsibilities compared to limited company directors, accountancy services will cost less and provide even better value for money.
- One of the significant benefits of being a sole trader is the flexibility you will have. As your own boss, you can choose when to work.
- Limited company directors must legally submit company details online (annual accountants, etc.). However, sole traders do not – giving you far more privacy.
Being a sole trader – important factors to consider
There are many benefits of being a sole trader. However, there are also plenty of disadvantages that you will need to consider before setting up your business. Below are the most common drawbacks of running a business as a sole trader.
- Sole traders have unlimited liability. Unlimited liability means that sole traders are responsible for any debts or losses the business experiences. For example, if a sole trader gets into considerable debt, they may need to sell personal assets to settle the outstanding payment(s).
- Limited companies are generally regarded as more “prestigious” compared to sole trader businesses in the corporate world. Therefore, sole traders may need help to source finance and get the best business rates compared to incorporated organisations.
- Following on from the point above, you may also experience a few issues when trying to work with new clients. Frustratingly, it is true that some businesses will only engage with limited companies and will not consider working with sole traders.
- Having total control of your business (as a sole trader) is one of the main benefits of choosing the self-employed career path. However, it is also one of the most significant disadvantages. As the sole representative of your company, you are responsible for all the critical decisions. You are 100% accountable for everything!
- There are more opportunities to take advantage of careful tax planning when you are the director of a limited company. Sole trader tax is quite straightforward, but there are fewer opportunities to benefit from careful tax planning and legally maximise your pay retention.
- Selling your business as a sole trader when you retire is not as straightforward as it is for a limited company. As the business is not a separate legal entity from the owner it makes the process slightly more complicated. If you decide to sell, you will need to organise a transferal of assets to the new owner.
- As sole traders work alone, it can often prove difficult to take holidays or even sick leave. Something that you should consider is what will happen if you have an accident or are sick and not able to work. As well as making it difficult to take on new contracts, you will also be faced with the question of how to fulfil existing contracts.
If you’re interested in finding out more about setting up your sole trader business and choosing the perfect accountant to assist you, please get in touch with us today, and our friendly Sales Consultants will provide you with a free and tailored consultation. You may decide that you would prefer to set up a limited company because it will suit your business requirements better. We can help you with both sole trader and limited company accountancy – so please get in touch with us to discuss your options.
We’re always here to support you if you want to explore other avenues in the future
We understand that many sole traders do not wish to start a limited company or change how they operate. However, if you decide later on that you would be interested in exploring the possibility of transitioning into a limited company director, we’re here to support you. Our professionals provide multiple accountancy services – including contractor accountancy, accountancy for small businesses and services for CIS limited companies. Therefore, if you’re interested in finding out more about your options now or in the future, please do not hesitate to contact us so that we can provide you with a free and thorough consultation. Please call 0800 229 4020 or complete the form on this page.