A sole trader setup is the simplest business structure. It means that you run your business as an individual, and any after-tax profits are yours. Many sole traders enjoy this entrepreneurial spirit and, seeing opportunities in other places, want to set up more than one business.
As a sole trader, can I have more than one business?
The good news is that this is possible. Sole traders can have two (or even more!) businesses. For the purposes of this article, we’ll talk in terms of you having two businesses.
Do I need to register each sole trader business separately?
Having more than one sole trader business doesn’t mean that you have to register for self-employment again. If you do that, HMRC will issue you with another UTR number, and you will have to return separate tax returns for each business.
How does this affect my tax, VAT and national insurance?
There are tax, VAT and national insurance implications you should be aware of if you have more than one sole trader business.
Tax and NI for sole traders with more than one business
When you complete your Self Assessment tax return, you’ll be required to complete a ‘self-employed income’ section for each business. The amount of tax and NI that you owe as a sole trader will be calculated based on the total amount of income.
Unfortunately, you will only get the Personal Allowance once, rather than an allowance for each business. This means that the tax free Personal Allowance is applied to the total amount of everything combined.
VAT for sole traders
Sole traders aren’t legally separate from their business, or businesses if they have more than one. This means that for VAT, all of your sole trader income is taken into account.
You must register for VAT when your turnover reaches the VAT registration threshold in any 12 month period. If you have more than one business, turnover from all of your business income is used to determine if the threshold has been reached.
As the VAT registration is applied to all of your businesses, it means all of your customers will need to pay VAT. This might not be desirable for all of your businesses.
Will I still qualify for the trading allowance?
The trading allowance is a tax allowance for miscellaneous trading income up to £1,000. It is a form of tax relief for sole traders and those with side businesses. If your business income is less than £1,000 a year, you don’t have to register for self-assessment or pay tax on this income.
Talk to one of the team about our online accounting services for your sole trader business. Call 020 3355 4047, use the live chat button on screen, or get an instant quote online.
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