Starting a new business? Get 40% off our accountancy services for 3 months! 😀

x

Starting a new business by ‘going it alone’ can be daunting. However, the good news is that starting out as a sole trader is by far the simplest and easiest way to get going.

You aren’t bound by red tape and paperwork that will have you tripping up before you’ve finished typing a business plan. You can, relatively quickly and easily, figure out if your business idea will work. You can also ‘learn on the job’.

Therefore, if you’re ready to take your first steps in to running your own business, starting as a sole trader is an excellent starting point. So what do you need to know?

The jargon

The first hurdle that all new business owners face is simply a matter of understanding some lingo. Bandied about from the tax man to your web developer, you’re going to need to feel confident.

The term ‘sole-trader’ is a way of describing the set-up of your business. It’s a one-man-band (although you may at times subcontract, or indeed use employees). By very nature, if you’re a sole-trader then you are self-employed. You don’t have a boss. You also don’t have a payroll department. You’ll be paying tax through Self-Assessment.

The good news is that if you do well then all the profits after tax are solely yours. The bad news is that if things go wrong, the liability is personally yours too.

Your responsibilities

The single number one thing you need to do in order to get cracking as a sole trader is to register for Self Assessment tax returns each year. This is simple to do and can be done here. You can use your own name, or choose a name but at this stage it doesn’t need to be registered. Registering for Self Assessment needs to be done within 3 months of when you start trading.

Once that is done you’ll then need to keep records of your business income and expenses so that you can accurately complete the tax return each year. This is considerably easier if you use cloud-based accounting software such as Pandle. Further good news is that this is free until you grow sufficiently to need more complex features.

Your tax return will determine how much income tax you must pay, as well as the amount of Class 2 and Class 4 National Insurance contributions you’ll owe.

To begin with, it really is that simple.

As you grow, and your turnover becomes greater, then you may also need to register for VAT. You must register for VAT if your turnover is in excess of £85,000. You can choose to register on a voluntary basis before then if you wish (this may be beneficial if you are selling to other VAT-registered businesses and wish to reclaim VAT).

A word about names

Probably one of the most exciting elements of starting your new business and building a brand and identity will be centred on choosing a name. Your business name should be unique, most likely available as a domain name too, and not misleading or offensive. It can be sensible to register your business name as a trade mark to prevent others from using it. Bear in mind though that you must include your own name on all business stationery as a sole trader.

Consider if you need a licence or special permissions

For some sole trader businesses you may need a special permission or licence from your local authority. Businesses niches this applies to include childminders and restaurants, for example. So do check if this is required in your circumstances.

Once all of the above is in place that’s it! You’re ready to get going. Good luck!

 

For advice on how to operate as a sole trader see our guide, here.

Do you need help with Self Assessment and filing tax returns? Get in touch for a free quote today!

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

More posts by this author
guest
0 Comments
Inline Feedbacks
View all comments

Read more posts...

Umbrella Companies for Self-Employed Contractors

When you set up in business as a contractor you might either work as a sole trader or as a limited company….

Read More

Get Ready for Small Business Saturday UK 2022

Small Business Saturday started in the US in 2010, on the first Saturday following Thanksgiving. It aims to encourage shoppers to consider…

Read More

Architects and Tax

Architecture is a highly diverse sector when it comes to tax. It’s partly down to the type of businesses that carry out…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.

Bookkeeping

You only need this service if you want us to complete the bookkeeping on your behalf.

Would you prefer to complete your own bookkeeping?

Yes
No

Call us on 020 3355 4047 if you’re not sure.