Sole Proprietorship Archives

News,May 2018

Self Employed or Limited Company: What’s the Difference?

George30/12/2021Accounting , Accounting Issues , Limited Company , Sole Proprietorship

While setting up your business, one of the most crucial decisions to make is to choose a business structure. There are a lot of business structures to choose from. Limited liability partnership is the less popular business structure used by professionals. The majority of the business structures in the UK are either self employed or limited company. According to the latest reports of Statista, there are around 4.3 million self-employed workers in the UK. On the other hand, there are over 4 million limited companies registered in the UK. Let’s dig deep into both to know what are they, are taxed the same, and what cost and administration is involved. Let’s kick off with what is self-employed and what is a limited company? We save your time, money, and stress by handling all your finances and business problems in no time! Call us on 020 8686 8876 or email us today. Self Employed or Limited Company: Differences Let’s have a quick glimpse at self-employed and limited companies. What is a Self Employment? Self-employed persons work for themselves as sole traders. There are no shareholders or officers and the self-employed person has total control over his business and is liable for all the profits and losses personally. The losses made by a sole trader directly impact the personal finances of a sole trader. Income tax is payable on the profit earned and needs to pay Class 2 and 4 National Insurance as a self-employed individual. What is a Limited Company? A limited company is a separate entity with its own identity and it is separate from shareholders and directors. The personal finances of directors of the limited company are kept separate from the company until there’s fraudulence or any breach. A limited company has to pay corporation tax on the taxable profit and they need to deduct income tax and NI from the employees’ salary through PAYE. Tax Implications Let’s see how self-employed persons and limited companies are taxed. Self Employed Tax Self-employed persons need to pay income tax through Self-Assessment. They need to register for VAT if reached the threshold of £85,000 (2021/22). Here are the tax rates and threshold that a self-employed person should know: Band Taxable income Tax rate Personal Allowance Up to £12,570 0% Basic rate £12,571 to £50,270 20% Higher rate £50,271 to £150,000 40% Additional rate over £150,000 45% The deadline for online tax return is Midnight 31 January 2022. Moreover, self-employed persons need to pay Class 2 National insurance if the profits are £6,515 or more a year and Class 4 NI on profits over £9,569. Here is the rate of NI rate you need to remember: Class Rate for tax year 2021 to 2022 Class 2 £3.05 a week Class 4 9% on profits between £9,569 and £50,270 2% on profits over £50,270 We can register you as self-employed to HMRC on your behalf! Fill out this form and let us handle everything! Limited Company Tax Instead of income tax, limited companies need to pay 19% Corporation tax on the annual profits. Company directors are levied tax based on the salary they earn from a limited company. Dividend tax is paid on dividends received from a company. In addition, income tax and Class 1 NI is payable on any salaries paid by the company. And companies need to pay Class 1 Employers’ NICs on salaries paid to employees. Want to incorporate a company? Get in touch with one of our professionals. Check out our company formation package! Administration and Costs A limited company needs more administration and management tasks compared to self-employed. Limited Company Administration All the limited companies of the UK need to register with Companies House. It must make sure to inform the registrar of companies informed of any changes made, need to file confirmation statement and PSC each year along with the company accounts. The cost of forming a limited company is affordable and the accountants are responsible to manage the accounting tasks along with dealing with HMRC and Companies House. Self Employed Requirements There are fewer legal responsibilities and administrative tasks in forming a limited company. You just need to register for self-assessment and pay the due tax and NI on time. Quick Sum Up So after giving this blog a read, you have now understood which business structure to choose: self employed or limited company. As a self-employed, you are your own boss and liable to pay tax and NI 2 & 4 on your earnings. Whereas, limited companies need to pay corporation tax and Class 1 NI on salaries paid to employees. Bear in mind that there is less hassle to work as a self-employed, but with limited companies, you have to meet administrative and legal responsibilities. Turn to us if you need any help with accounting, tax payroll, and other finance-related problems. We will solve your tax issues in no time and at an affordable price! So, contact us now! Disclaimer: This blog contains general information about the topic.

A Basic Guide to Become A Successful Sole Trader!

George03/12/2021Sole Proprietorship , Sole Trader , VAT

A sole trader is a person who is self-employed and owns a business. According to research, about 60% of UK businesses are sole traders. This business structure is popular because of the simple ways to get into trading as well as the paperwork is minimal. However, sole trader advice by professionals will always be helpful before you plan to begin. By now, you must be wondering that if it is the right option for you to opt for sole trading. Maybe you are already into working as a sole trader but look for new ways that can push your business toward success. This article is designed to provide the best and easiest tips to make your trading history a success story. Before we delve deep into the discussion further, we need to have a look at the focused points of discussion in this article. This includes the following: Sole Trader Advice to Be Successful Dedicated Bank Account Registration Process VAT and Tax Focused Skills for Business Work Place The Bottom Line Speak to one of our qualified accountants? Give us a call on 020 8686 8876 or request a callback. Sole Trader Advice to Be Successful: To be ensured that you want to be a sole trader, it is important that you gather enough information based on the drawbacks and advantages of becoming the one. The advantages that come with this structure cannot be denied. Like: Business control all by yourself Hire people that suits you and the work needs with your own choice. The greater degree of privacy factor about your business Pay tax on your benefits and keep the rest The business can be closed in an easy way than is the case in a limited company. You only have to clear your debts, gather the money and notify HMRC about the business closure. Moreover, there are several drawbacks that are needed to be considered before taking the plunge in sole trading, this will further help to make the right decision. The freedom and independence that come with working as a sole trader are the prominent factors to the tendency increasing for this. Below are certain tips discussed to be successful. Dedicated Bank Account: Many people seek to have a dedicated account to fulfil the needs of the business finances. Maintaining a separate account for business finances is a better idea to be clear about your business and money. This will allow you to have a clear view of your income and expenses. Registration Process: It is very important to get yourself registered as a self-employed person with HMRC once you start trading. This will help to declare the status. The year in which you started working as a sole trader, you can register by 5th October after the tax year has ended. Late registration might cause penalities. VAT and Tax: As HMRC explains, a sole trader has to pay self-assessment tax returns every year and for that, it is a must to keep a track of your income in a fair manner. This does not matter if the business has yet started to make profits or not. On a tax return, the since and business expenses are declared as well. Moreover, you have to register for VAT if your annual turnover goes above £90,000. Focused Skills for Business: In the process of becoming a business owner, things you are dealing with at the same moment become overwhelming for you. The development of your business skills is equally important. The business owner must take part in the conferences, courses and event shows to be updated. By having a command of professional skills, you can do the following: Find new clients easily Be updated about the market demands and changes Process different skills as a professional Work Place: The dream of becoming your own boss and going for self-employment is to seek the balance in professional work life. It comes with several advantages but the factor of being lonely is when you don’t have enough company in the surroundings for the interaction. Working from home means there are more chances of being distracted as well. The factor of productivity goes low because of the house chores interruption. It is here suggested that the workplace from your home should be a well-managed room or side that can easily separate your mind from your personal life. Some other benefits that choosing a better workplace will bring include the following: Discipline Workday and dress properly before you enter into your workplace Enter in professional work mode Choose your suitable working hours Enjoy your lunch breaks The Bottom Line: Now that you have developed a better understanding of the Sole Trader Advice, we can sum up the discussion by saying that becoming a sole trader comes with prominent and undeniable advantages as discussed in the article but being self-disciplined will help you achieve success as a sole trader. We hope this article helped to develop a better understanding. Therefore, look no further other than CruseBurke. We offer comprehensive accounting and taxation services to Sole Traders only at £25 per month. You may create your own unique package here. Disclaimer: This article intends to provide general information based on Sole Trader Advice to be successful and relevant details.

What is a Sole Proprietorship? Responsibilities of a Sole Trader

George30/07/2021Business , Sole Proprietorship , Sole Trader

If you are fed up with working under someone else and want to be your own boss, you should turn to a sole proprietorship. Although there are different kinds of business structures to choose from but sole proprietorship is the one that needs less hassle and paperwork to establish. So, in this post, we’re going to explore what is a sole proprietorship and what are the responsibilities of the sole trader. A sole proprietorship is a basic business structure where you get work freedom and you have total control over your business affairs. Here you are totally responsible for the success and failure of the business. Though the downside of this structure is you and your business are taken as a single entity where you’re liable for all the business debt. However, here you keep all your income/profit yourself. We’re providing complete accounting and taxation package for Sole Traders only at £25 a month and you can make your own custom package here. Get an instant quote right now! What is a Sole Proprietorship? It is the simplest form of business structure where, usually, the business is owned and operated by a single individual. Here the owner and business are considered the same. A sole proprietorship is straightforward to establish as there are no legal formalities and a lot of administration involved to run a business. What Defines a Sole Trader? If your earning is over £1,000 as a self-employed worker in a tax year, you can register your business as a sole trader with HMRC. For this reason, you can pay Class 2 NICs voluntarily to get access to government benefits. To establish your business as a sole trader, you don’t need to register at Companies House and there is not resignation fee. In addition, you don’t need to have directors, shareholders or partners to handle. As you are yourself the director or owner of your business. But as a sole trader, you need to follow regulations and meet your liabilities. Sole tradership is not only concerned with trade, it also includes plumbers, electricians, builders, plumbers and so on. Almost all kinds of freelancers come under the category of a sole proprietorship. Responsibilities of a Sole Trader Sole traders have a number of legal responsibilities that you need to follow. These include: 1) Choosing a Business Name As a sole trader, you must choose a business name that is unique and different from others. You also need to use this name on your paperwork like invoices, etc. You can’t put Ltd with your business name. Furthermore, you don’t need to use sensitive works for your business. 2) Register your Business with HMRC Though you don’t need to register your business at Companies House, however, you need to register it with HMRC. As you need to pay your income tax through a self-assessment system. By doing it, you can send your annual self-assessment tax return to HMRC to informal your business earnings and expenses and calculate your tax accordingly. Alongside, you can also pay your Class 2 NIC through the tax return. You can register your business with HMRC through the help of these three ways: Fill out an online form via HMRC print off the form and fill it in, and send it to the address on the form telephone HMRC on 0300 200 3310. 3) Keep Accurate Records You need to keep business records as evidence for your business. As HMRC may require the details of your business sales, income, expenses, etc. It also includes bank receipts, invoices, bank statements, cheques, and slips. In addition, you also need to have PAYE records if you have employees and VAT records if you are a VAT registered business. Managing records and keeping track of everything can be daunting and time-consuming. Therefore, you need to talk to our accountants to sort out everything. Quick Sum Up So, you have got enough information on what is a sole proprietorship and what are the responsibilities of the sole trader. A lot of business owners might feel it difficult to manage everything while running their business. For this reason, we are there to make everything easy for you. Whether it’s record-keeping, financial management, tax return or dealing with HMRC, we can do all for you at an affordable rate. So that you can focus more on your business for its success. Therefore, look no further other than CruseBurke. We have a team of expert bookkeepers and accountants for your assistance. Don’t hesitate to get in touch with us. Get an instant quote right away! Disclaimer: This blog provides basic information on sole proprietorship.