What is Sole Trader working?
If you start working for yourself, you’re classed as a self-employed sole trader – even if you’ve not yet told HM Revenue and Customs (HMRC).
As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them. This differs from working through your own limited company as this is classed as a separate entity. As a sole trader, both you and the business are classed as one entity for tax purposes.
Although setting up a limited company may be more tax efficient, the initial set up may take longer and requires a certain amount of administration by the company director. Setting up as a sole trader is a much simpler process, requires less administration and is cheaper to run.
Points to consider when deciding whether to set up as a sole trader:
- Credibility – some clients may choose to only deal with limited companies rather than a person working as a sole trader
- Financial support – it can be more difficult to raise finance as a sole trader
- Liability – if the business falls into debt the sole trader is fully liable
- Looking for work through a recruitment agency – If you are registered as a sole trader and you find work through a recruitment agency, they won’t be able to deal with you in your capacity as a self-employed person under Section 134 of the Income & Corporation Taxes Act 1988
How can Bright Sky help?
Bright Sky Limited provides accountancy services to sole traders tailored to the level of accountancy support your business needs. You will have access to your own company portal enabling you to control your company finances wherever you are as well as keep your accounts up to date. You are always fully aware of your tax position and how much you can withdraw.
The benefits of setting up as a sole trader with Bright Sky Limited:
- No set up costs
- Total control and access 24/7 to your online company portal
- Dedicated support
- Phone app to log business expenses
- Completion of statutory paperwork
- Free IR56 reviews