STYLES & ASSOCIATES
ACCOUNTANCY SERVICES
Serving businesses in Alton, and throughout Hampshire
What is a sole trader?
A sole trader is legal structure of a business where an individual runs and owns the business as a self-employed person. As a sole trader, you can keep all your business’s profits after you have paid tax on them, but you are also personally responsible for any losses your business makes. When starting a new business, deciding on your business structure is one of the first decisions to make.
According to government figures in 2020, an estimated 76% of private British businesses were sole traders, making it the most popular business structure in the UK. Being a sole trader is a simple way to get started, but to ensure you make the right decision read our guide on whether to register as a sole trader or limited company.
Registering as a sole trader.
You are required to register as a sole trader with HMRC if you have earnt more than £1,000 from self-employment in the last tax year. You should also register as a sole trader if you want to prove that you are self-employed (in order to claim tax-free childcare) or if you want to make voluntary tax payments that help you qualify for certain benefits.
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To set up as a sole trader, you need to tell HMRC that you pay tax through Self Assessment
Sole Trader Tax Efficiencies.
If you are a sole trader, your business will have various running costs. You can deduct some of these costs to work out your taxable profit.
Working From Home
If you work from home as a sole trader, you are able to claim a variety of costs as running costs against your tax bill, these include:
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Electricity
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Gas
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Council tax
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Home insurance
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Mortgage interest (not repayments)
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Rent (if you rent your home)
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General household repairs
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Landline rental
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Broadband costs
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Cleaning
Other Expenses:
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Stationery
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Phone Bills
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Travel Costs (inc. fuel, parking, train or bus fares)
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Uniforms
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Insurances
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Bank Charges
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Training
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Advertising
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Business premises (if not working from home)
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Materials
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Staff cost
Your accountant will be able to advise which expenses are allowable and can be used to reduce your tax liability.
Sole Trader Tax Return.
In your first year of business getting professional advice is highly recommended. Accountants are experienced in navigating complicated tax legislation and compliance rules. By outsourcing to an accountancy company you can benefit from their extensive knowledge and experience without the associated costs of employing a full time inhouse accountant.
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If you are self-employed as a 'sole trader' and earned more than £1,000 in a tax year, you must complete a self assessment and file a tax return - the system used by HM Revenue and Customs (HMRC) to calculate tax on your income. If your turnover is in excess of £85,000 (as at April 2021), you must register for VAT.
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When you appoint Styles & Associates Accountancy as your accountant, we will act on your behalf with HMRC by filing your returns and all necessary financial documents. For the self-employed, having the benefit of professional assistance provided by an accountant can help you avoid late penalties, reduce your tax liabilities and provide expertise that as a sole trader you may have otherwise found difficult to access.
Sole Trader Accounting Software.
When you are running a business, time is valuable. Accounting software packages are designed to help sole traders and small business owners make time efficiencies by producing easy to generate invoices and providing automated reports, allowing you to focus on what you do best – running your business.
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By 1st April 2022, VAT registered sole traders will need to use an online or cloud based accountancy platform to comply with the MTD (Making Tax Digital) rules. At Styles & Associates, we work with HMRC compatible online accounting software and are a Xero bronze partner. Take a look at some of the accounting software solutions available to sole traders in our guide.
Free Resources For Sole Traders.
As a sole trader we know that your time is limited so we have put together a range of free resources to help plan and grow your business including:
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Cash Flow Forecast Template
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Accounting Calendar
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Business Plan Template
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VAT Calculator
Fixed Fee Accountancy Services For Sole Traders.
As a sole trader you will not necessarily need to employ a full time accountant, which is why many sole traders choose to outsource bookkeeping and accountancy services. By outsourcing, you can access skills and knowledge without the financial commitment of employing a full time accountant. Accountants can help advise on your pricing model, identify ways to save money, help you understand your records and support you with cash flow management.
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When choosing an accountant, it is important as a sole trader to consider the type of service you require:
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Ability to meet your accountant locally
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Call or email a question without being charged
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Fixed fee services
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Bespoke or full service options – bookkeeping, payroll, accountancy, management accounts, forecasting, self assessment, VAT returns
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Flexible and scalable services
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Free online resources for cash flow planning and growth
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Get in touch with Styles & Associates Accountancy to discuss how we can help you become a tax efficient sole trader and provide bookkeeping and accountancy services to meet your specific needs. Call 01420 541 554 for a quote today.
Moving our business to Styles & Associates made savings for us on our accounting fees, corporation tax, and personal tax.
Gareth Wilding