Going legit as a sole trader

[James102]

Hi guys I don't have a huge round but I feel I need to say I'm actually self employed I don't have a huge round but I wanted to wait for the new tax year before I did will I loose much money doing this will I have a huge tax bill and I was wondering what I should be paying in national insurance

 

[ched999uk]

You need to register as self employed but I don't think there any time limits but you must register and submit tax returns! I think you need to complete a tax return in each year you are trading or HMRC will not be happy!

As for a huge tax bill it all depends on your outgoings to set up the business as they can be offset against profits plus you have a personal allowance (unless using it for other work). I'm not sure on van costs but you might not be able to offset the entire costs of purchase in the first year - then again you might want to spread it out over a few years to reduce your liability.

Best to speak to an accountant as they will help you sort it all out and hopefully save ££ on your tax bill.

Tip: save every receipt that relates to a business expense as you can offset that against your income to reduce your liability.

 

[Part Timer]

You will pay 20% tax on net earnings over £12570 and Class 2 & 4 NI. See link for the amounts

Self-employed National Insurance rates

National Insurance contributions if you're self-employed - rates and exceptions.

www.gov.uk

 

[spruce]

Become a sole trader

Register as a sole trader with HM Revenue and Customs - your legal responsibilities if you run a business as a self-employed sole trader.

www.gov.uk

 

[spruce]

Hi guys I don't have a huge round but I feel I need to say I'm actually self employed I don't have a huge round but I wanted to wait for the new tax year before I did will I loose much money doing this will I have a huge tax bill and I was wondering what I should be paying in national insurance

The last person you need to get on the wrong side of is the tax man.

You have been working for at least 2 years judging by your first posts in Dec 2022. The tax man will want to know about how you have been earning money for the past few years. By not registering and submitting a tax return before now, you have made it very difficult for yourself. Penalties add up for non completed or late tax returns.

 

[marlowswindows]

People like yourself give the rest of us the image of being a tax dodger so thanks for that

 

[Yogi1872]

People like yourself give the rest of us the image of being a tax dodger so thanks for that

Give the guy a break ffs, not one of us on here won't have bent the rules over the years doing things that weren't above board. Until people changed over to bank payments absolute none of us will have put every cash payment through.

Or putting receipts through even now that really shouldn't be put through. Pot kettle springs to mind.

 

[Yogi1872]

You could say you haven't been working the last couple of years and your partner was providing. I'd go online and register as a sole trader ASAP though and try keep yourself right from now on. Make sure you declare everything that has a digital foot print, absolute everything. You can't hide that if they look into you.

 

[Scrubsy]

Hi guys I don't have a huge round but I feel I need to say I'm actually self employed I don't have a huge round but I wanted to wait for the new tax year before I did will I loose much money doing this will I have a huge tax bill and I was wondering what I should be paying in national insurance

@James102 it used to be that you could work for 3 months self employed before registering as a sole trader (I assume it gives people a little leeway incase it doesn't work out). When I first registered my earnings were quite low for a while and I didn't have to pay national insurance, but I did pay it anyway to keep up my 'stamp' as it used to be called (helps with pension etc). As some of the other lads have said it's best not to get on the wrong side of the tax man. You aren't the first that would have not registered for a while and you certainly won't be the last, but it will 100% be best to sort it out now mate.

 

[Peter J]

You will pay 20% tax on net earnings over £12570 and Class 2 & 4 NI. See link for the amounts

Self-employed National Insurance rates

National Insurance contributions if you're self-employed - rates and exceptions.

www.gov.uk

If you’re married or there’s someone you really really trust you could set it up as a partnership. That will mean you will only have to pay tax after both of you have earned over £12570. Meaning you can earn £25140 a year before paying tax. It’s not for everyone but might be of some use

 

[Part Timer]

If you’re married or there’s someone you really really trust you could set it up as a partnership. That will mean you will only have to pay tax after both of you have earned over £12570. Meaning you can earn £25140 a year before paying tax. It’s not for everyone but might be of some use

Even if they don't earn enough to reach the tax threshold you can pay them enough to use it up.
For example my Wife earned around £8k a year working part time. I paid her £350 a month to do the paperwork.

 

[ched999uk]

If you’re married or there’s someone you really really trust you could set it up as a partnership. That will mean you will only have to pay tax after both of you have earned over £12570. Meaning you can earn £25140 a year before paying tax. It’s not for everyone but might be of some use

Just so people know, a partnership also requires an extra tax return - so 2 personal tax returns and a partnership return each year, so would be a little more expensive for an accountant.
You also need a partnership bank account which, for some weird reason, is more difficult to get - well less banks do them.

 

[dazmond]

Dont forget you don't pay Tax on the first £12,570 of earnings and you probably won't pay tax on earnings over that amount anyway due to expenses....

So for instance if you earn 20k for the year and 8k in expenses you would pay zero tax anyway....

Don't forget you will have to pay on account after the first year.this catches a lot of people out so start putting money away every month to cover this now...

Self assessment is easy if your using round software,no need for an accountant at all (as all information can be found online)if your a sole trader with no employees and under the VAT limit that is...

 

[P4dstar]

The last person you need to get on the wrong side of is the tax man.

You have been working for at least 2 years judging by your first posts in Dec 2022. The tax man will want to know about how you have been earning money for the past few years. By not registering and submitting a tax return before now, you have made it very difficult for yourself. Penalties add up for non completed or late tax returns.

To be fair if the OP didn’t earn over 1k profit in the first few months to April 2023 he didn’t need to submit a tax return for that year. For the 23-24 year he should have registered as a sole trader by October 23. That said it’s a rule that HMRC don’t really worry about. So assuming he is planning to now submit a tax return for 23-24 and the profit for 22-23 was sub 1k (which is entirely plausible) he could put things right.

The above is not applicable if the OP was in receipt of benefits. If that is the case the whole set has just been fraudulent from the off.

 

[Peter J]

My biggest piece of advice in this case would be to contact HMRC before they contact you. They will be a lot more forgiving if you are seen to be doing the right thing even if you are a bit (or a lot) late.