Possibly stupid sole trader questions
Discussion
Hello all,
I am considering in the near-ish future setting up a sole trader business as a sideline extra income (hopefully).
I will be doing this as well as being employed. (Unless things go crazy - unlikely)
1 - does the sole trader business have to be continually operating? Initially I may be quite sporadic. Does it matter if there is say 6 months of inactivity?
2 - do you have to make a profit? Obviously the ideal but initially may not be.
3 - with me being employed as well, do I just fill in the relevant sections of tax return, HMRC work out the tax bands and calculate me a bill?
Like I say, stupid questions, sorry!
I am considering in the near-ish future setting up a sole trader business as a sideline extra income (hopefully).
I will be doing this as well as being employed. (Unless things go crazy - unlikely)
1 - does the sole trader business have to be continually operating? Initially I may be quite sporadic. Does it matter if there is say 6 months of inactivity?
2 - do you have to make a profit? Obviously the ideal but initially may not be.
3 - with me being employed as well, do I just fill in the relevant sections of tax return, HMRC work out the tax bands and calculate me a bill?
Like I say, stupid questions, sorry!
You don't have to trade continuously. You can trade one day a year if need be.
There is no need to make a profit. There will be someone along in a minute to say that HMRC will be very interested in your accounts if you constantly make a loss. That simply isn't true. HMRC have much bigger fish than you to fry.
Essentially, yes. But you would do well to talk to an accountant. Their fees will be deductible from any profit and tax due, plus they will fill out your tax returns, etc. Depending on how big you're going to be (turnoverwise) one of those Tax Assist franchises will probably be sufficient and only a couple of hundred quid a year. It might be you get a recoding for your PAYE from your 'first job' or you may get a tax bill. Or both. But worry not, you get month and months to pay the bill. Unless it's over (£5k? happy to be corrected) when you will have to make a July payment 'on account' for the following bill.
Eta, if your turnover per year (not profit!) is going to be over £87k you need to be VAT registered. You will also need to register as a sole trader on HMRC website within six months of starting trading. Have a look now.
There is no need to make a profit. There will be someone along in a minute to say that HMRC will be very interested in your accounts if you constantly make a loss. That simply isn't true. HMRC have much bigger fish than you to fry.
Essentially, yes. But you would do well to talk to an accountant. Their fees will be deductible from any profit and tax due, plus they will fill out your tax returns, etc. Depending on how big you're going to be (turnoverwise) one of those Tax Assist franchises will probably be sufficient and only a couple of hundred quid a year. It might be you get a recoding for your PAYE from your 'first job' or you may get a tax bill. Or both. But worry not, you get month and months to pay the bill. Unless it's over (£5k? happy to be corrected) when you will have to make a July payment 'on account' for the following bill.
Eta, if your turnover per year (not profit!) is going to be over £87k you need to be VAT registered. You will also need to register as a sole trader on HMRC website within six months of starting trading. Have a look now.
Edited by Tyre Smoke on Monday 1st November 19:12
Good advice from Tyre Smoke. Just two things I'd add....
VAT - if you're selling to businesses, there's a good chance they will be VAT registered. If so, it may be worth you registering as well (which you can do voluntarily before you reach the threshold). Adding 20% will make no difference to your customers and means you can claim 20% back on the stuff you buy. If you're selling to the public, don't bother,
And check your contract of employment. Some employers can get a bit tetchy about staff setting up their own businesses regardless of how small so just make sure yours isn't one of them.
And good luck! I really like hearing about people setting up these sort of sideline businesses. Underpins what an entrepreneurial nation we are and more power to you.
VAT - if you're selling to businesses, there's a good chance they will be VAT registered. If so, it may be worth you registering as well (which you can do voluntarily before you reach the threshold). Adding 20% will make no difference to your customers and means you can claim 20% back on the stuff you buy. If you're selling to the public, don't bother,
And check your contract of employment. Some employers can get a bit tetchy about staff setting up their own businesses regardless of how small so just make sure yours isn't one of them.
And good luck! I really like hearing about people setting up these sort of sideline businesses. Underpins what an entrepreneurial nation we are and more power to you.
marksx said:
Hello all,
I am considering in the near-ish future setting up a sole trader business as a sideline extra income (hopefully).
I will be doing this as well as being employed. (Unless things go crazy - unlikely)
1 - does the sole trader business have to be continually operating? Initially I may be quite sporadic. Does it matter if there is say 6 months of inactivity?
2 - do you have to make a profit? Obviously the ideal but initially may not be.
3 - with me being employed as well, do I just fill in the relevant sections of tax return, HMRC work out the tax bands and calculate me a bill?
Like I say, stupid questions, sorry!
3. You'll have to complete both the Employee and the Self employed sections of your return. The HMRC website then calculates what they think you owe and shows you their workings. Make sure you show any tax already deducted by your Employer, otherwise you might end up paying twice I am considering in the near-ish future setting up a sole trader business as a sideline extra income (hopefully).
I will be doing this as well as being employed. (Unless things go crazy - unlikely)
1 - does the sole trader business have to be continually operating? Initially I may be quite sporadic. Does it matter if there is say 6 months of inactivity?
2 - do you have to make a profit? Obviously the ideal but initially may not be.
3 - with me being employed as well, do I just fill in the relevant sections of tax return, HMRC work out the tax bands and calculate me a bill?
Like I say, stupid questions, sorry!
Countdown said:
3. You'll have to complete both the Employee and the Self employed sections of your return. The HMRC website then calculates what they think you owe and shows you their workings. Make sure you show any tax already deducted by your Employer, otherwise you might end up paying twice
And also ensure they don't over-charge on your NICs. Currently doing battle with HMRC... 
StevieBee said:
Good advice from Tyre Smoke. Just two things I'd add....
VAT - if you're selling to businesses, there's a good chance they will be VAT registered. If so, it may be worth you registering as well (which you can do voluntarily before you reach the threshold). Adding 20% will make no difference to your customers and means you can claim 20% back on the stuff you buy. If you're selling to the public, don't bother,
And check your contract of employment. Some employers can get a bit tetchy about staff setting up their own businesses regardless of how small so just make sure yours isn't one of them.
And good luck! I really like hearing about people setting up these sort of sideline businesses. Underpins what an entrepreneurial nation we are and more power to you.
Thank you for the info. I think I'd only be selling to public, not that I'd ever rule out selling to business but I can't see it for a while. I'd be surprised (amazed!) if I hit the vat threshold.VAT - if you're selling to businesses, there's a good chance they will be VAT registered. If so, it may be worth you registering as well (which you can do voluntarily before you reach the threshold). Adding 20% will make no difference to your customers and means you can claim 20% back on the stuff you buy. If you're selling to the public, don't bother,
And check your contract of employment. Some employers can get a bit tetchy about staff setting up their own businesses regardless of how small so just make sure yours isn't one of them.
And good luck! I really like hearing about people setting up these sort of sideline businesses. Underpins what an entrepreneurial nation we are and more power to you.
My employer does have a rule about other employment. Specifically about conflicts of interest, distracting from the employed work, or, bizzarely work which you are paid for or contracted to, which to me is any employed work?
Countdown said:
3. You'll have to complete both the Employee and the Self employed sections of your return. The HMRC website then calculates what they think you owe and shows you their workings. Make sure you show any tax already deducted by your Employer, otherwise you might end up paying twice
Puggit said:
And also ensure they don't over-charge on your NICs. Currently doing battle with HMRC...
I'll keep an eye on this, thank you!Ronstein said:
Also, if you're using a trading name (as opposed to just using your own name), register it with the IPO.
I will be trading under a name. However I need to settle on a name first 
I was self-employed as well as doing a full time PAYE job for close to 10 years, and another 9 years in a part time PAYE job.
I've been completely self-employed for 4 years now.
Really simple to do, just register with HMRC so that you get the correct self assessment tax return forms each year. All online now though, no paper forms.
Keep a set of books, showing income and outgoings - receipts, bills, etc.
I just keep 2 separate piles of paperwork, plus a business mileage log. I spend a couple of hours at the end of the tax year adding everything up, then fill out the tax return online.
I keep things simple, have never used an accountant. I did have a face to face chat with an accountant once, and he couldn't think of anything that would save me money.
I've been completely self-employed for 4 years now.
Really simple to do, just register with HMRC so that you get the correct self assessment tax return forms each year. All online now though, no paper forms.
Keep a set of books, showing income and outgoings - receipts, bills, etc.
I just keep 2 separate piles of paperwork, plus a business mileage log. I spend a couple of hours at the end of the tax year adding everything up, then fill out the tax return online.
I keep things simple, have never used an accountant. I did have a face to face chat with an accountant once, and he couldn't think of anything that would save me money.
You may get less help now that budgets have been cut but have you considered asking HMRC themselves?
When I set up my website years ago I was able to have meetings with the business support unit (or whatever it was called) that took me through the steps I needed to do to keep everything correct and legal.
I think they even came to my house!
I've been a sole trader for 30 odd years but took a full time position in the same field to help out a mate with a company start up.
This was just before Covid hit. My freelance work then just disappeared so I thank my lucky stars that I had the full time contract.
As it's shifts I still do a bit of my freelance now and in the case of the odd long job lasting a few days, I just take holiday from the main job.
I use a very good knowledgeable accountant so on top of my usual income and expenses, I also give him my payslips, P60s etc from my job.
The only shocker now is that as my main job takes me almost to the 40% tax mark, all my freelance work produces a bit of a tax bill
It's made me a bit unwilling to take on too much extra work only to see half of the money (including NI) taken off me.
Anyhow it's all been pretty easy and my accountant is only £400 a year.
This was just before Covid hit. My freelance work then just disappeared so I thank my lucky stars that I had the full time contract.
As it's shifts I still do a bit of my freelance now and in the case of the odd long job lasting a few days, I just take holiday from the main job.
I use a very good knowledgeable accountant so on top of my usual income and expenses, I also give him my payslips, P60s etc from my job.
The only shocker now is that as my main job takes me almost to the 40% tax mark, all my freelance work produces a bit of a tax bill
It's made me a bit unwilling to take on too much extra work only to see half of the money (including NI) taken off me.
Anyhow it's all been pretty easy and my accountant is only £400 a year.
clockworks said:
I was self-employed as well as doing a full time PAYE job for close to 10 years, and another 9 years in a part time PAYE job.
I've been completely self-employed for 4 years now.
Really simple to do, just register with HMRC so that you get the correct self assessment tax return forms each year. All online now though, no paper forms.
Keep a set of books, showing income and outgoings - receipts, bills, etc.
I just keep 2 separate piles of paperwork, plus a business mileage log. I spend a couple of hours at the end of the tax year adding everything up, then fill out the tax return online.
I keep things simple, have never used an accountant. I did have a face to face chat with an accountant once, and he couldn't think of anything that would save me money.
Obviously a rubbish accountant I've been completely self-employed for 4 years now.
Really simple to do, just register with HMRC so that you get the correct self assessment tax return forms each year. All online now though, no paper forms.
Keep a set of books, showing income and outgoings - receipts, bills, etc.
I just keep 2 separate piles of paperwork, plus a business mileage log. I spend a couple of hours at the end of the tax year adding everything up, then fill out the tax return online.
I keep things simple, have never used an accountant. I did have a face to face chat with an accountant once, and he couldn't think of anything that would save me money.
OP, see if you have a local business chamber of commerce where you can get free advice. If you set up as a sole trader, don't feel that you have to set up a business account at your bank - they will charge you for it. Simply set up a second account, call it Marksx 2 and make sure all your personal and business transactions are kept apart. Unless you hit the ground running at 100mph, then the start may well be lumpy, so expect periods where it is quiet. See how much you can claim against home expenses if you are working from home - gas, electric, phone etc.
Good luck.
Good luck.
Eric Mc said:
Obviously a rubbish accountant
Quite possibly. He was a customer that I did some work for, and we just had a chat after I had set up his clock.I'm pretty sure that I've got everything covered already though, as I've had some good advice on PH.
I also did a "start your own business" course that the job centre offered free when I was made redundant 23 years ago.
I work from home in 2 spare bedrooms (claim the WFH allowance), and use 2 different cars for customer visits (claim the mileage allowance). Keeps it simple, rather than claiming percentages of bills and vehicle costs. I'd do it differently if I had a dedicated vehicle for the business, or a purpose-built workshop.
I keep receipts for all business related purchases - materials, tools, office supplies, insurance, etc.
On the subject of bank accounts, I agree with the earlier poster who said to use a separate personal account, rather than a paid-for business account, if income is relatively low. I've been doing this for many years, never had a problem with Lloyds. Nearly everything is done online.
clockworks said:
Quite possibly. He was a customer that I did some work for, and we just had a chat after I had set up his clock.
I'm pretty sure that I've got everything covered already though, as I've had some good advice on PH.
I also did a "start your own business" course that the job centre offered free when I was made redundant 23 years ago.
I work from home in 2 spare bedrooms (claim the WFH allowance), and use 2 different cars for customer visits (claim the mileage allowance). Keeps it simple, rather than claiming percentages of bills and vehicle costs. I'd do it differently if I had a dedicated vehicle for the business, or a purpose-built workshop.
I keep receipts for all business related purchases - materials, tools, office supplies, insurance, etc.
If your most up to date advice on running your own business dates from 23 years ago, maybe a chat with a "good" accountant might not be a bad idea.
On the subject of bank accounts, I agree with the earlier poster who said to use a separate personal account, rather than a paid-for business account, if income is relatively low. I've been doing this for many years, never had a problem with Lloyds. Nearly everything is done online.
I'm pretty sure that I've got everything covered already though, as I've had some good advice on PH.
I also did a "start your own business" course that the job centre offered free when I was made redundant 23 years ago.
I work from home in 2 spare bedrooms (claim the WFH allowance), and use 2 different cars for customer visits (claim the mileage allowance). Keeps it simple, rather than claiming percentages of bills and vehicle costs. I'd do it differently if I had a dedicated vehicle for the business, or a purpose-built workshop.
I keep receipts for all business related purchases - materials, tools, office supplies, insurance, etc.
If your most up to date advice on running your own business dates from 23 years ago, maybe a chat with a "good" accountant might not be a bad idea.
On the subject of bank accounts, I agree with the earlier poster who said to use a separate personal account, rather than a paid-for business account, if income is relatively low. I've been doing this for many years, never had a problem with Lloyds. Nearly everything is done online.
Little update,
Thank you all for the responses.
After a dreadful few days at work last week I've decided to get things going now.
Name decided, accounting spreadsheet built, company documents drafted - invoice etc, email domain bought, few more tools and materials ordered, logo design in progress, first couple of orders in, though they are for friends so don't really count . Registering the company name to do once I can get on the government gateway (where does a passport get to?!).
Thank you all for the responses.
After a dreadful few days at work last week I've decided to get things going now.
Name decided, accounting spreadsheet built, company documents drafted - invoice etc, email domain bought, few more tools and materials ordered, logo design in progress, first couple of orders in, though they are for friends so don't really count
. Registering the company name to do once I can get on the government gateway (where does a passport get to?!).Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff