Sole Trader Accountancy Services
We can help a range of businesses and needs, no matter the size, income and level of assistance required.
Every business is different, and that means that the structures vary. Everything will need to be fine-tuned, including the accounts and bookkeeping, and there can be penalties from HMRC if things are wrong.
Sole traders tend to be small-scale, so may need as much help as possible, especially if they are fresh start-ups. The legal side of financing any business can be daunting for anyone who doesn’t know what they’re doing.
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A sole trader is defined as an individual who runs and owns a business. It is the most common business build in the UK, and the way many companies start out before moving to limited company status once a sufficient amount of money is coming in.
They are fully liable for any debts and contracts the company has, and on the legal side of things, there is no difference between the business and the individual.
This can make issues such as tax returns slightly more complicated. Sole traders are classed as self-employed. Therefore, they have their own set of tax rules and regulations to adhere to. You don’t have to deal with Companies House though, just HMRC, which reduces some of the burdens.
Because the business and individual are classed as one in the eyes of the law, there is no requirement to have two separate bank accounts, but it is still recommended to make dealing with finances much easier.
Sole Trader Taxes
Some of the taxes which may have to be paid by sole trader owners are:
- Personal Income Tax: There is always an income allowance before tax is enforced, so if you own any more than this amount, it is only this that will be taxed. In 2018/19, this stands at
- £11,850. There are also bands – the basic rate is 20% for income up to £34,500. The upper is 40%, applied between £34,500 and £150,000. The highest is 45% and applies to income of £150,000+
- National Insurance Contributions: Self-employed individuals have to pay class 2 NICs and Class 4 NICs. These apply if you earn over £6,205 and you need to pay 9% on annual profits between £8,424 and £46,350, with an additional 2% on profits above £46,350 per year
- VAT: Any company which earns over the threshold has to register for VAT payments. In 2018/19, this is £85,000
Self-Assessment Tax Return
Before the business is even up and running, you should register with HMRC for self-assessment tax returns using a CWF1 form. This gives you a Unique Tax Reference Number which can be used in correspondence.
Online tax returns are always due by the 31st of January every year, for the previous tax year (6th April to 5th April of the following year). So, for the 2018/19 tax year, you will have to submit your accounts by 31st January 2020.
There are strict deadlines, and penalties and fines if there is a late submission or inaccuracies.
Accounts And Bookkeeping
For the tax returns to be made easy, things have to start at the bookkeeping and annual accounts. It is from these that the data is picked from, so if they are wrong, this can make the whole process a lot more difficult.
Records should be updated periodically, as taking data from months back can soon become overwhelming. Having access to the best online accounting software for your work can be a huge help, with perks such as a mobile app for remote updates, 24/7 access and real-time calculations making life so much easier and organised.
It is from the books that you can see what can be claimed for and all of the expenses. For instance, if you work from home, you may be able to claim for some of the cost of running your home, or for travel expenses if you have to drive to meet clients, or for that cup of coffee you had with a client. It all adds up. Most bookkeeping services will automatically categorise and file all of these, along with proof of purchase such as receipts.
It is important to keep these in order and understandable, so you don’t pay any more tax than you have to. Making Tax Digital (MTD) is also coming into force gradually, which you may need help with and which online accounts can deal with automatically through HMRC.
How An Accountant Can Help
The level of assistance your business needs can depend on what you know about tax and accounts, how organised or busy you are, or even just the type of business you own. You can choose a full accountancy package or just get help in certain areas, such as:
- Registration: Worried about missing something out or don’t know where to start? Accountants can get you registered for tax with HMRC, so you are on the right path
- Bookkeeping: Need someone to help you actually build the financial side of your business or want the best software available? An accountant can either revamp your books and get them in order, or start from the very beginning and periodically keep you in check using MTD and online accounting
- Accounts: From the bookkeeping data, you will need accounts creating. For a sole trader, it is likely these will only have to be annual, but come before a tax return is due. An accountant can create this data from your finances
- Tax Returns: Filling out the forms and sending them may take a day at the very least if you’re organised. Accountants can get this done quickly and in the best manner, with no mistakes that could prove expensive. Software may be able to show you what is due in real-time, too
- Timing: Because there are strict deadlines in place, you need to be organised. This can be hard if you’re your own boss, as it could involve taking time away from the business to get everything in order and ensure it is correct. Accountants can tell you when everything is due and give you reminders
- Advice: From recommending that you put some money away each month to help pay the taxes at the end of the year, to how best to deal with expenses and any claims you need to appeal for
- Regular Check-Ups: Monitoring your business can ensure you are operating as tax efficiently as legally possible. Any mistakes or issues only get worse the longer they’re left, so suggestions and rectifications could be essential
- Bank Reconciliation And Balancing: You need to make sure everything matches up, and your incomings match your outgoings and assets. Software gives you this data automatically, and accountants can double-check before any big moments
- Correspondence: HMRC may choose to randomly check your accounts and return, or the claims you’ve made. They can go through your accountant to save you having to deal with it all, or you can hire an accountant to represent you if you’re called for a meeting.
Can I Use Account Software As A Sole Trader?
Bookkeeping was once conducted using physical books, ledgers and spreadsheets. There would be piles and piles of receipts stored in shoeboxes. Now, the way forward is bookkeeping software which can be updates 24/7 and ASAP. Most accountants recommend the latter, especially with MTD coming into force. Software can help automate some processes.
You can purchase your own software and use it without an accountant being involved, which could reduce some of your annual costs.
However, there are so many options out there that the decision can be hard. One which is perfect for a plumber with expenses and equipment may not be great for a florist with a market stall and customers.
An accountant can make this decision easier, by recommending the perfect software which they use themselves. It will likely be a ‘specially-created for small businesses’ system depending on your client package, and they will have immediate access to your records.
Keeping the data is one part of the finance, but using it to create accounts and tax returns is yet another task. Software can rid the need for a calculator.
Accountants can offer invaluable help on anything you’re struggling with, or just offer another pair of eyes to check for any discrepancies which HMRC would pick up on.