How should I keep my records?
We recommend you use an online cloud accounting software to manage your bookkeeping and day to day recordkeeping. Making Tax Digital will be coming into force and is starting from 6 April 2019, whereby VAT registered businesses will need to file their VAT Returns using an online bookkeeping software. In the meantime, for those not affected, you could otherwise keep a spreadsheet or ledger book. HMRC require that you record your transactions individually and keep sufficient accounting records. You must also keep all your receipts, whether in paper or digitally for at least 6 years after the year-end in case of HMRC enquiry. We can help you set up a bookkeeping process and assist you with providing the appropriate software. Please see our MTD page.
What expenses can I claim?
Please feel free to download our business expenses guide, which you may find useful to keep to hand.
How do I know if I’ve gone over the VAT threshold?
You should review your turnover on a monthly basis and you are required to look back 12 months at the end of each calendar month to determine if you have gone over the VAT threshold (currently £85k). If you have done so, you will need to register for VAT, if not, you simply review the same the following month. You can voluntarily register for VAT as a trading business if you are making or about to make taxable supplies and the benefit of doing so will depend on your circumstances. You will also need to consider if you will go over the VAT threshold within the next 30 days.
What VAT expenses can I claim?
You can only claim VAT on your costs if you are VAT registered and have a VAT invoice or receipt. Some receipts may not show a breakdown of VAT but will give you an indication on the receipt, such as the VAT number and a symbol against the vatable costs. Some costs do not give rise to VAT, such as postage and books but a stationery or Post Office receipt might show a VAT number so it is important to review in detail.
Should I be a limited company?
There is no single answer as to whether a sole trader should incorporate, it is entirely dependent on your business circumstances. For some, there may be commercial reasons to incorporate and trade through a company but for others it may just lead to unnecessary extra admin burden and costs. We recommend you talk this through with your adviser to understand the specific implications and priorities or you and your business. Previously the tax advantages were greater as a small owner managed business but the effective cost difference has been closed since the introduction of the effective dividend tax.
What’s the difference between a sole trader and being self-employed?
Nothing, both terms mean the same and you can see these referred to separately when in fact they mean the same thing.