As a self-employed sole trader you will need to complete a self assessment tax return when it comes to paying your tax. This can be quite a complex process and can be quite a steep learning curve.
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Although using an accountant isn’t a requirement, it is often a very good idea. As a sole trader it is unlikely that your area of expertise is in finance, and therefore it can be very difficult to grasp the various complexities of the tax system and to make sure that you don’t overpay or underpay tax.
Tax Returns for Sole Traders Help
All taxable income must be reported on a self assessment tax return however non-taxable income and ISA interest is not reportable. You also have a personal allowance to take into account. You will need to include your salary and your trade profits as well as your rental income and bank interest and dividends. It can also be all too easy to miss the deadline and to face a penalty from HMRC.
It is the sole trader’s responsibility to tell HMRC that they are in business and need to file a self assessment tax return. Business owners must:
- Keep all company records of expenses and sales
- Send an annual self assessment tax return
- Register for payroll for employee payments
- Pay income tax on all profits
- Pay class 2 and, if applicable Class 4 NI contributions
- Register for VAT if the turnover reaches the specified threshold
- Register with the CIS if you are a sub contractor or contractor in the construction industry
As skilled and experienced accountants The Accountancy Solution can ensure that your tax returns for sole traders is accurate and submitted in a timely manner for your peace of mind.
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Self Assessment Tax
Frequently Asked Questions
Most frequent questions and answers
As a general rule, you should regsiter for tax return when you are earning more than £1,000 per annum as sole trader. You can also register if you want to make voluntary Class 2 National Insurance payments.
It would take only 10-15 minuites to populate a spread sheet each day to enter data of your daily expenses. You can also take picture of reciepts and save it in a secured drive. Or you can use a software like Reciept bank.
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If a person already has 35 qualifying years or is likely to do so by the time that they reach state pension age, missing a year will not adversely affect their state pension entitlement. However, if they have less than 35 years (and will be able to reach the minimum 10 years needed for a reduced state pension by the time that they reach state pension age) making voluntary contributions can be worthwhile.
While any gain on the sale of a property that has been the taxpayer’s main residence throughout the period of ownership is covered by private residence relief, the flip side is that if the main residence is sold at a loss, the loss is not an allowable loss for capital gains tax purposes.
Taking a loan can be tax efficient, particularly if paid back before the trigger date for the s. 455 charge. It may be an attractive option to get over a difficult period where a return to profitability is anticipated, allowing a dividend to be declared to clear to loan balance.