Everything you need to know about Sole Trader accounting for the single-member businesses
A one-man business is the simplest form of doing general business in England. Many people tend to choose this option, especially in the beginning, because it is associated with very simple and straightforward accounting and quick and easy company registration. So then, what should you know about accounting for single-member businesses? All relevant information can be found below.
In order to work as a Sole Trader, you must register the company within three months from the start of your operations. You should also know that your freshly founded company will not have a legal status just yet, so you will be responsible for all financial obligations of the company. Of course, nothing prevents you to expand its business and employ more people, but then you are obliged to provide them with proper support personnel. You must also regard that when a company passes a threshold income amounting to £82,000, you will be obliged to register yourself as a VAT payer.
Furthermore, as a righteous business owner, you decide the amount of your own salary and the amount of overall investments, which can be covered by your private money or the bank loans. When it comes to accounting for the single-member businesses, it actually really straightforward. Your single responsibility is to conduct the revenue and expense book, which will include all revenues and the cost of doing business as well as the preparation of annual tax return and sending it to HM Revenue & Customs. In addition, it is your responsibility to release the income tax – personal income tax (your income is revenue lessened by the costs) and you are expected to contribute to National Insurance. As a Sole Trader you will pay NICs Class 2 and 4. Of course as always, depending on your availability and skill, the bookkeeping can be taken care of by yourself, however you can also seek help from a professional accounting office. We know from experience that the second solution is much better and much more beneficial, because you eliminate the risk of errors found in documentation. Besides, you gain more time for yourself and your business.
It is worth mentioning that operating as a Sole Trader can only be done by a UK resident. Furthermore, nothing stops the self-employed to cooperate and even merge with other businesses, however bear in mind that any such changes will require the completion of the relevant formalities.
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