Accountant for Sole Traders

Owning your own business yields excitement, personal freedom and rewarding perks, but it also yields a host of legal and financial responsibilities that you simply can’t ignore. If you’ve established yourself as a sole trader or are considering setting up as one, request a free, no-obligation consultation with Thobani Accountants. Our team of licensed and qualified Peterborough accountants can give you an accurate quote within five minutes of your consultation and walk you through your tax obligations as a self-employed business owner. Learn more about our sole trader accounting services below and contact us with any questions. We’re here to help.

Do I Need an Accountant as a Sole Trader?

You’ve just become self-employed – congratulations! Everyone at Thobani Accountants is thrilled for you, but we just want to remind you that you must register as self-employed with HM Revenues and Customs (HMRC) within three months of starting a business. Register as a sole trader now.

As licensed and qualified business accountants, we specialise in helping sole traders manage their business and personal tax affairs. We know that sole traders are 100% responsible for their business’s success and failure, and we appreciate the pressure that puts on a business owner to succeed. It’s why our team of qualified experts makes bookkeeping, tax planning and filing a Self Assessment tax return as simple and straightforward as possible. We simply leave confusion and jargon at the door.

How Much Tax Does a Sole Trader Pay?

Sole traders are allowed to keep all business profits after paying two rounds of tax. Sole traders must pay National Insurance and Income Tax based the amount of profits their business makes and file a Self Assessment tax return before the following dates:

  • January 31st
  • July 31st

National Insurance

The amount of National Insurance you’re required to pay as a sole trader is based on which class your business profits fall under. The two National Insurance classes are:

  • Class 2 – your profits exceed £6,365 a year
  • Class 4 – your profits exceed £8,632 a year

If you earn more than the Class 2 threshold above, you’ll pay £3 a week, which goes toward state benefits, such as State Pension.

If you earn more than the Class 4 threshold above, you’ll pay:

  • 9% on profits between £8,632 and £50,000
  • 2% on profits over £50,000

Payments on Account

As a sole trader, you’re required to make payments toward your tax bill called “Payments on Account,” which include Class 4 National Insurance if you’re self-employed. You must make two Payments on Account a year unless:

  • Your last Self Assessment tax bill was under £1,000
  • You’ve already paid more than 80% of the tax you owe. This could be because your bank has already deducted interest on your savings or simply because of your tax code.

Each Payments of Account is half of your previous year’s tax bill. Payments are due by midnight on 31 January and 31 July.

Please note that if you still owe tax after making two Payments on Account, you will need to make a “balancing payment” by midnight on 31 January next year.

Income Tax

The amount of Income Tax you pay as a sole trader depends on how much your income exceeds the Personal Allowance of £12,500. If your income exceeds this allowance, you will pay the following:

Taxable Profit

% Income Tax 

Up to £12,500 (Personal Allowance)

0% (Tax-Free)

Between £12,501 and £50,000

20%

Between £50,001 and £150,000

40%

Above £150,001

45%

VAT

You may need to file a VAT return if your income exceeds the VAT threshold of £85,000. If this is the case, then you’ll need to register quarterly VAT returns using Making Tax Digital software.

If you need help with bookkeeping, filing a Self Assessment tax return or VAT tax return, contact Thobani Accountants. We make keeping track of your business’s cash flow simple and hassle-free, so you can quickly see where you can improve your bottom line. Our Peterborough accountants will help you put money aside and reduce the amount of tax you need to pay so your business becomes more tax efficient. Book a meeting today to see what’s possible with Thobani Accountants.

Book a Free, No-Obligation Consultation

Accounting and tax doesn’t need to be a headache. Contact us to speak with our friendly team of accounting specialists to learn more about our wide range of accountancy services. Call us for a free, no-obligation consultation today!