Want to start your own business? Whether you want to be your own boss, pursue your dream job or want to work with the people you like, there’s no other option than to be a sole trader. With a lot of benefits, there are some legal obligations of a sole trader that you must keep on top of when you start your journey as a sole trader.
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Legal Obligations of a Sole Trader
If you want to start a business of your own, you need to know the following legal obligations of a sole trader. You are legally required to do the following things:
1) Self Assessment
As a sole trader, you’re not fully exempted from tax. The first thing before starting your business as a sole trader is to register for Self-Assessment. You can easily register as a self-employed with HMRC here, you need to file tax returns every year with HMRC. On the earnings you made as a sole trader, you need to pay tax. Remember that if you are working part-time as a sole trader, you still need to register.
2) Choose a Name
You need to have a unique name for your business. When choosing, make sure it is easy for people to spell – especially if you want a name for your website. Don’t choose a name that’s too long or difficult to spell, as it is difficult to be recognised by the people.
Legally, you need to keep a record of all your business income and expenses. Keeping records for a sole trader is generally easy and straightforward. But investing in a professional bookkeeper or accountant is worth your time and money.
4) Tax Return
By midnight on 31st January, you need to report all your expenses and income to HMRC every year. CruseBuke has a team of accountants to save your time from the hassle by working out your self-assessment tax bill from the records you keep throughout the year.
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You also need to pay your self-assessment tax bill. It is a good idea to file your tax return before the deadline to avoid a £100 fine. In addition, you also need to know that on 31st January you need to make payment on account towards the next year’s tax bills, which takes account of the previous year’s tax bill.
Though registering for VAT as a sole trader is not compulsory. But if you cross the turnover limit of £85,000, it is compulsory for you to register for VAT. If you do, you need to fill the VAT return forms and update your records as well. You can register for VAT online.
Once you registered you need to charge VAT from your customers and pay VAT return to HMRC. VAT can be complicated! So, it is better to take the help of a VAT accountant to keep your business on track and submit your VAT returns to HMRC on your behalf.
Most professional doesn’t need to be licensed. However, some businesses like a business that deals with selling alcohol need to have a license. Other professions like doctors, accountants, lawyers etc also need to have a license.
Quick Sum Up
In addition, if you employ people in your sole trading business, you need to legally register for PAYE ( Pay As You Earn). Also, you can get insured to save yourself from a disaster or damage. If you have built your own business from scratch, you need to follow these legal obligations of a sole trader to take your business to the next level.
If you are looking for an accountant or bookkeeper to record, manage and monitor the financial affairs of your own business, look no further other than CruseBurke. We have a team of expert bookkeepers and accountants for sole traders for your assistance. Don’t hesitate to get in touch with us.
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Disclaimer: This blog is intended just for general information on the above topic.