Sole Traders

Our complete tax solution for Sole Trader businesses

Martax Personal Tax Solutions are an expert team of Chartered certified accountants providing high quality accounting and tax services to sole traders businesses and self-employed individuals. We are specialist sole trader tax return accountants in London and Surrey providing services for a fixed fee that ensures that the tax liability of sole traders is kept to a minimum.

If you are a sole trader or a self employed individual, you will have certain responsibilities towards HM Revenue and Customs (HMRC) and that is where Martax Personal Tax Solutions can help to fulfil your obligations. Our sole trader tax expert team can discuss your accounting and tax needs and provide you with all the necessary help and guidance so that you stay compliant with HMRC.

What is a Sole Trader?

A sole trader, as the name suggests, is the person who solely runs the business and owns the business. This is the most simplest form of business structure and is a first step towards starting your own business.

Sole traders also called self-employed which means they work for themselves and therefore, legally, the individual and the business are the same.

Benefits of being a Sole trader?

The main advantage of working as a sole trader is that it is the most simplest business structure to operate, with least compliance requirements. Other benefits include:

  • You are the owner and keep of all the benefits of running a successful business
  • Start-up costs are very low
  • Easier to close down
  • Full control over all the day to day management of the business
  • Greater privacy as all data is kept private

Disadvantages of being a Sole trader

The main disadvantage of being a sole trader is that there is no legal distinction between you as an individual and the business. As a sole trader are responsible for all the debts of the company and therefore any creditor can sue you personally for the recovery of the business debts.

Others disadvantages may include:

  • If you are working as a sole trader you might end up paying higher taxes as compared to other business structures such as a limited company
  • Limited capacity to raise capital
  • It is difficult to grow your business own its own
  • Difficult to get big contracts

What are my responsibilities as a Sole Trader?

A sole trader is required by law to register the business and pay its taxes. You will need to keep a record of the business sales and expenses, submit tax returns to HMRC every year and pay any tax liabilities and national insurance liabilities on taxable profits.

As a sole trader, you must register for VAT if your turnover is over the VAT threshold (current 2018: £85,000)

What taxes do I have to pay as a sole trader?

As a sole trader in the UK, you will be required to pay income tax, Class 2 National Insurance and Class 4 National Insurance if your taxable profits are above a certain level.

Tax and NI Rates for sole traders

Income Tax Rates 2017/18
Band Taxable profits Tax Rate
Personal allowance Up to £11,500 0%
Basic rate £11,501 to £45,000 20%
High rate £45,001 to £150,000 40%
Additional rate Over £150,000 45%
Class 2 Nation Insurance Rates 2017/18
Band Taxable profits NI payable
Small Profits Threshold (SPT) Below 6,025 per year 0
Above SPT Above £6,025 £2.85 per week
Class 4 Nation Insurance Rates 2017/18
Band Taxable profits NI Rate
Lower Profits Limit (LPL) Below £8,164 per year 0%
LPL to Upper Profits Limit (UPL) £8,164 to £45,000 9%
Above UPL Above £45,000 2%

Relevant due dates for Sole Traders

The relevant deadlines for sole traders in relation to filings and for payments are as below:

  • Register for self-assessment by 5 October following the end of the tax year in which the sole trader business has been started
  • Submit a paper return by 31 October following the end of the tax year
  • Submit an online return by 31 January following the end of the tax year
  • Pay any tax due by 31 January following the end of the tax year

How Martax Can Help

As expert sole trader accountants, we can help you with the following:

  • Registration of your sole trader business
  • Set up of online accounting software
  • Advice in relation to which expenses can be claimed for business purposes
  • On-going help and advice in relation to accounting and tax matters
  • Advise on claiming all the legitimate expenses to optimize tax savings
  • Preparation of annual sole trader accounts
  • Preparation of your sole trader self assessment tax return
  • Calculation of sole trader tax liability
  • Submission of sole trader tax return with HMRC

For more information and to arrange a free consultation, please contact us on 020 8330 3167 or email us at tax@martaxpersonaltaxsolutions.com.

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