What can accountants do for sole traders?
Being a sole trader might be less than formal than operating as a limited company, but you’ll still need to keep records about your self-employed income, and submit tax returns to share this information with HMRC.
A good accountant will help you manage your record-keeping system in a process known as bookkeeping, and use this information to make sure that you claim any tax relief you’re entitled to when you submit your tax return.
What kind of tax return does a sole trader submit?
If you work for yourself as a sole trader, then you’ll normally need to submit a tax return called a Self Assessment to HMRC. Submitting your tax return tells HMRC about the money you make from self-employment, as well as any business expenses that you can claim tax relief on in order to reduce your tax bill.
As a sole trader you must submit a Self Assessment for the previous tax year by 31st January each year if you’re filing online, or by 31st October if you submit a paper return. Tax returns can be quite complicated, so it’s a good idea to leave plenty of time to file yours.
What is a Sole Trader?
A sole trader is someone who registers as self-employed, but unlike a limited company there’s no legal separation between you and your sole trading business. This means that paying yourself is pretty easy, and you can just keep any profits you make once you pay your expenses and tax.
Just be aware that this also means there’s no distinction between your personal assets and your business. If you struggle to pay your bills, your assets might be at risk!
Registering as a sole trader is a bit more straightforward than setting up a limited company. Log in (or create) a Government Gateway account, and register for Self Assessment online using the ‘sole trader’ option. HMRC will send out your reference number within 10 days, so leave yourself plenty of time!