Characteristics of Sole Traders
People may choose to be sole traders, as it enables them to be their own boss. Meaning that they can dictate how the business must run, which direction and what products or services to render. A perk of being a sole trader obviously is that one gets to keep all the profits.
Also, setting up one’s sole trading business is relatively easy as it has low start-up costs. A sole trader’s business is also relatively private in nature because sole traders do not have to register with Companies House. It is also easy to change the structure of such a business into a larger operation at a later stage.
Some disadvantages of a sole trader are as follows: a sole trader has unlimited liability as you and your business are one entity. It is also harder to take a break and it can be difficult to obtain funding.
Accounting For Sole Traders UK, What is a Sole Trader?
Accounting for sole traders in the UK is necessary to operate finances efficiently and meet legislative requirements. A sole trader is a person who is the exclusive owner of a business. Typically, a sole trader can keep all the profit that they have earned after tax. Obviously, a sole trader is also liable for all losses that the business may incur as well.
In 2019, sole traders made up approximately 60% of small businesses in the UK. This proves that being a sole trader is an incredibly popular business structure in the UK. Freelancers and people who wish to run their own businesses typically tend to favour sole trader business platforms.
Accountantonduty is a firm of chartered accountants who offers services to small businesses, such as sole traders. We focus on a prospective approach to accounting ensuring the longevity of such small businesses. Our goal is to ensure that such businesses flourish and people can succeed in their dreams of running their own business.
Tax and Accounting Implications
If a sole trader’s business earns between £0 and £50000, they will pay a basic rate of 20%. If a sole trading business earns between £50001 and £150000, they will have to pay a taxation rate of 40% on further income earnt. If a sole trading business earns above £150000, they will have to pay a rate of 45%. These are just some of the basic tax rates relating to sole proprietors.
A sole trader does not have to keep a business account as a sole trader and their business is one entity. However, it is recommendable as it makes it easier to keep track of business-related finances.
A sole trader also must keep track of any VAT owe or if they must pay VAT due to their turnover exceeding the VAT threshold. It is also necessary to keep track of business expenses so that they may be claimed.
Where to Find Accounting for Sole Traders UK
Obviously, keeping track of all tax and financial obligations can be difficult, especially when you are busy dealing with customers. Accountant On Duty is a firm of accountants based in London. We offer accounting services to small businesses such as a sole trader.
Accountant On Duty offers the following accounting services which could be beneficial to sole traders: management accounting services, financial accounting services, payroll accounting solutions, accounting software services, bookkeeping services, and tax services amongst others. Bookkeeping services and management accounting services might be useful to sole traders. This is because sole traders may benefit from the direction that management accounts may offer from a strategic standpoint. Bookkeeping services also help sole traders keep their business up to date.
If you are a sole trader looking for financial advice, Accountant On Duty can help. With our highly qualified accountants in London, your business is sure to prosper and flourish.
We Offer A Free Financial Review
Assess your financial objectives and goals for your business
Discuss with you your existing financial plan and current investments
Complete tax planning and scenarios to cover all possible outcomes