Every year more people make the jump from employee to becoming their own boss, with an estimated just over 4 million people now self-employed in the UK.
There are lots of perks to becoming your own boss, but there are lots of questions that people ask us at Kasion when they are setting up their new business. So, we thought we would take a few and help answer some of the most frequently asked.
Do I need to register my sole trader businesses with HMRC?
Yes, if you are trading as a sole trader, you need to register, which is easy to do online, and should be done within three months of trading.
Once registered, you will be issued with a UTR (unique tax reference) number and added to HMRC’s system, so they can expect to receive your figures from you each year, and you will be taxed on the profits you make.
You can trade under your own name, or you can choose another name for your business. You do not need to register your name.
Some rules to follow.
You must not;
- Include ‘Limited’, ‘Ltd’, ‘Limited Liability Partnership’, ‘LLP’, ‘Public Limited Company’ or ‘plc’.
- Be offensive.
- Be the same name as an existing trademark.
Register if you are self employed at Gov.uk
Do I always need to submit a self assessment as a sole trader?
No. HMRC has a short questionnaire for you to check, using your own circumstances; Check if you need to send a Self Assessment tax return at Gov.uk
This self assessment system is used by HMRC to collect income tax.
The rule is, if you make more than £1,000 in sales, you should submit a self assessment. However, if your sales are below £1,000, you still need to phone HMRC with your numbers, so they can update their records. They will want to know, the sales total, expenses total and profit made.
What’s the difference between a sole trader and a Limited company?
When you set up as a sole trader, you are essentially the business, so you become liable personally for any business debts. The money you make, after paying the tax due, is your own.
If you form a limited company, it becomes a separate legal entity. You need to be careful about how you take money out of a limited company as the money does not belong to you, it belongs to the company.
Do I need to register for VAT?
You will need to register for VAT if your turnover exceeds the VAT threshold (currently £85,000 a year). Turnover is another term for sales or revenue.
There are lots of financial aspects to consider when becoming self-employed and setting up as a sole trader – we know as we were there once too! But it doesn’t need to be daunting or feel like you are going it alone.
We work across many sectors from start-ups to large businesses, including helping them to make decisions from when to start a business to when to grow it.
If you would like personal-focused accountancy support as a sole trader to add value and take the pressure off you, please get in touch Here