Sole Trader Accounts are quite popular among the business owners in UK. If you are thinking about opening a small scale business soon, then you must know about the sole trader account facts, which are especially meant for the self-employed individuals.
8 Facts you need to know about Sole Trader Accounts
Fact 1: Sole Traders are the driving force behind UK Economy
According to the stats, almost 3/4th of all the UK economy is driven by the self employed individuals. This means, that a significant amount of economy is generated from the sole traders, a.k.a self owned businesses. As a result, sole trader accounts are widely popular among the commoners who have an option to start up their business.
Fact 2: Opening a sole trader account is not difficult
Opening an expenditure account as a self employed individual is not at all difficult. Due to the ease in starting the account, more and more people find it easy to start a business. All one needs to do is register with HMRC. HMRC is a Helpline for the Newly Self-Employed, where one needs to provide the relevant information – personal and professional. One can even register online on the HMRC website.
Fact 3: Sole traders can further expand
Being a sole trader does not limit you; you can expand your business anytime you want. For this, you can convert your account for sole trader to limited company. As a sole trader you can also employ more people to work for you. However, upon expansion you must opt for a payroll scheme and collect the National Insurance Contributions as well as tax from your employees and submit it to HMRC.
Fact 4: You can be penalized if you don’t register
It is must for all the self-employed individuals to register with HMRC. The registration period lasts up to 3 months after starting the business. However, if you register later on, you will be fined. The fine usually is £100, but it can also be a higher amount. It is best to register for sole trader right away as the process of registering is extremely easy.
Fact 5: Sole trader accounts are cheap than a limited company
Setting up a self employed account costs negligible, in fact, it’s quite cheap when compared to a limited company account. It is a better option for individuals who seek to later on expand because the cost of sole trader account is nil. Whereas, a limited company finance account will cost more and will involve tax charges as well.
Fact 6: Being a sole trader is not always easy
Considering the fact that an individual is solely responsible for the business, it is possible for them to face some financial problems. Financial problems such as debts are the basic liabilities a self employed individual would face. For instance, a business owner could risk the personal savings and assets because the sole trade account is not considered as a separate finance account.
Fact 7: Self employed people need to pay the tax
As business owners, individuals are entitled to pay the tax based on the business profits they earn. At the end of the business year, they need to file for self assessment tax return, which they can do in person through paper forms or through the online HMRC account. Businesses which do really well also employ accountants in London to do the tax work which specifies the income and expenses (bills, receipt, invoices etc.) thoroughly.
Fact 8: Sole Traders control their business
‘Be your own boss’ is true for the sole traders as the individuals have complete authority and control over their business. They can run it as it seems suitable and make decisions without having to rely on others. Moreover, the entire business data is kept private and controlled by the owner only, which excludes any chances of data theft. However, it is evident that the business owners are also open to many financial risks.
You can see that there are several benefits and drawbacks of having sole trader accounts. However, every business is entitled to several risks but these risks don’t usually overpower the benefits provided by the financial account for sole traders.