Understand The Key Points Of Being A Sole Trader

First, you should understand what a sole trader is and know the difference between self-employed. A sole trader is actually known as a sole trader, however, self-employed refers that someone does not employ you. There are a number of people who are self-employed, keep on their business, and follow a sole trader structure.

Here’re some names that are used in sole trade structure, for example, electricians, plumbers, freelance writers, personal tutors, etc.

Understand the legal duties and accountabilities of a sole trader

Having your business and playing the role of a sole trader is an easy option for a new start-up however there are some legal duties where accountants in Peterborough come into the role.

The need for filing a self-assessment tax return

If you are a sole trade then it is required to file a self-assessment tax return at the end of the year. Pay the bill till the 31^st January of your next year and tax is counted on the profit you have generated. Filing requires receipts of sales expenses along with other records.

Required to make National insurance contribution

When you are a sole trader, you must have to make two national insurance contributions like class 2 and class 4.

Class 4 national insurance is counted on its own once a year is included in your tax automatically at the time when you pay the self-assessment tax return.

Class 2 national insurance is known as the flat-rate contribution and is collected every week. Though it is a small amount, however, it is necessary to register for class 2 or you might be asked to pay for it in lump-sum on a decided date.

Register for VAT

It is an option for those who have a turnover of up to £85,000, in case, you cross this number then it is required to take VAT registration.

When you are done with its registration, then you’ll need to connect with accountants in Peterborough so that you can complete the VAT returns and accounts remain updated. You have an option to register online and this way you’ll get the VAT number and online VAT account will open to file your returns.

Need assistance to work as a sole trader?

Various factors you need to take into consideration before you proceed to become a sole trader. Various people start as a sole trader and later they register themselves as a limited company. The decision is good, however, it is ideal to connect with an accountant who can guide you. Accountants in Peterborough can assist in you what being a sole trader refers to and you would know the right structure for your business.