Setting up as a sole trader accountancy advice

Setting up as a sole trader accountancy adviceSetting up as a sole trader can often be the easiest and most cost-effective route for individuals to go into business. However, you will need more than a spare room and an internet connection to make your ideas successful.

Sole trader legal structure

What is a sole trader?

A sole trader is a business owned by one person, where they and their business are legally the same entity. According to the Department for Business, Enterprise and Regulatory Reform, there are as many as three million sole traders in the UK, which represents 64 per cent of all private sector enterprises – making it the most popular form of business in the UK.

Tips on setting up as a sole trader

Apart from being the simplest way of setting up and testing your market, another big benefit is getting to keep all your profits after tax. But the risks can be high, as you are personally responsible for any liabilities incurred by the business.

When deciding what to call your business, you need to make sure it has not already been chosen by someone operating in the same sector. Otherwise, you might be sued for passing off their brand as your own. Checking on the web and in the phone book first is a good way to avoid future legal altercations.

Also, if you are planning to turn your business into a limited company, check the name has not already been registered at Companies House – as you may lose your branding by having to change what you are called further down the line.

Declare your status as a sole trader

Once you begin trading the first thing you will need to do is register as self-employed with HMRC. If you fail to do so within the first three months you will be fined £100.

Sole trader records and accounts

Because you are self-employed, you will have to complete a yearly self-assessment tax return. To help you do this you will need to keep a careful record of all your invoices and receipts. It is also a good idea to set up a business bank account in order to keep all your incoming and out goings separate from your personal account.

The amount of tax you will pay will depend on the amount you earn, ranging from ten to 40 per cent. National Insurance contributions are at a fixed rate under class two and four. For more information visit HM Revenue & Customs.

If you are considering this and need any help or advice why not contact Omni Chartered Accountants on 01902 837408 or request a free of charge call back? Alternatively, click here to contact us.

We want you to be enthusiastic, motivated and enjoy your new journey as a sole trader!


EU accounting directive could be threat to UK economy

Map of EuropeA radical new accounting regime set to shake-up the UK’s small business reporting landscape could pose a risk to the British economy as an unplanned by-product of an attempt to slash red tape.

That’s the stark warning from Nigel Sleigh-Johnson, the ICAEW’s Financial Reporting Faculty head, as the government publishes its final recommendations on how the new EU Accounting Directive will be implemented in the UK.

Sleigh-Johnson said;

“Only time will tell whether the reduction in the information required in small company accounts is a sensible reduction in red tape or a source of risk to the UK economy.

“ICAEW for one has persistently warned against the potential risk that over-simplifying reporting requirements can have on the ability of small companies to secure credit.”

What are EU Accounting Directive recommendations?

Under the BIS proposals, set to be enshrined in company law by July 2015 and become effective for financial years beginning on or after 1 January 2016, the most profound changes relate to small businesses.

A legal restriction will be placed on the amount of information required in small company accounts, while small businesses will be denied the option to file so-called abbreviated accounts at Companies House. But they may be allowed to both prepare and file a new simplified form of ‘abridged’ accounts.

Accounting thresholds for SMEs due to rise

Accounting thresholds for small companies are also due to rise, meaning more businesses will have access to the simplified reporting regime.

Sleigh Johnson said he was encouraged that BIS had listened to some of its key concerns, especially that access to the proposed abridged accounts regime for small companies will be restricted to companies that have secured shareholder buy-in first.

But he expressed disappointment that the introduction of the new accounting regime for small companies, especially at an EU level “has overall been an exercise in damage limitation rather than one of well-considered, proportionate simplification, and that subsequently the time available for debate about UK implementation has been so restricted”.

Small businesses, their advisers and lenders would be well advised to prepare for implementation of the new accounting regime, irrespective of the outcome, he added.

The Financial Reporting Council is expected to consult shortly on detailed proposals for revised accounting standards for small and micro companies, also due to come into force on 1 January 2016.

Have your say about the EU Accounting Directive proposals on Twitter @OmnitasTax or Facebook. Omni Chartered Accountants are here to help guide you and provide affordable accounting solutions for your company – contact us now or of course, you can request a free of charge call back.