Setting up as a Sole Trader - help & tips please
Discussion
So last year while I was furloughed and eventually made redundant I dabbled with a bit of Mountain Bike Coaching and decided that I couldn't make a living out of it so went back too Engineering.
I'd like to carry on the coaching but as a side line at weekends to my main employment (Monday-Friday).
I've got a website etc. all sorted but struggling as bit with how to register a business - where/how do I register a business name? HMRC site tells you you need to but thats it.....
As I understand it if I make less than £1000/year from my side line I don't need to tell HMRC as there is a Trading Allowance.
I'm hoping that I could make a bit more than that so will need to register with HMRC for self assessment. With the self assessment How does it work that my main income is PAYE?
Also for business records I assume I'll need to keep a record of incoming/outgoing and expenses etc. and produce a profit/loss statements - will these need to be submitted with the self assessment?
Thanks in advance, probably a few more questions as and when I think of them.
I'd like to carry on the coaching but as a side line at weekends to my main employment (Monday-Friday).
I've got a website etc. all sorted but struggling as bit with how to register a business - where/how do I register a business name? HMRC site tells you you need to but thats it.....
As I understand it if I make less than £1000/year from my side line I don't need to tell HMRC as there is a Trading Allowance.
I'm hoping that I could make a bit more than that so will need to register with HMRC for self assessment. With the self assessment How does it work that my main income is PAYE?
Also for business records I assume I'll need to keep a record of incoming/outgoing and expenses etc. and produce a profit/loss statements - will these need to be submitted with the self assessment?
Thanks in advance, probably a few more questions as and when I think of them.
You have to tell HMRC that you're trading, and send in self-assessment tax return each year. Having no interest in that part I used a decent book-keeper
Then you'll be 'Woody t/a Mountain Bike Coaching' and off you go. Market, advertise, sell, get business, invoice, keep records of everything. Anything you buy for business use can be deducted from profits. Send in tax return - you can earn up to £12,000 a year so if you have no other income you won't be paying any income tax. However you may have to pay NI - I'll leave that to a forum expert.
Whilst your business is you and vice versa (ie not a separate legal entity) it helps to have a separate bank account for it so that 'business money' is separate from 'personal money'. You can transfer funds from one to other as you wish.
That's about it
Then you'll be 'Woody t/a Mountain Bike Coaching' and off you go. Market, advertise, sell, get business, invoice, keep records of everything. Anything you buy for business use can be deducted from profits. Send in tax return - you can earn up to £12,000 a year so if you have no other income you won't be paying any income tax. However you may have to pay NI - I'll leave that to a forum expert.
Whilst your business is you and vice versa (ie not a separate legal entity) it helps to have a separate bank account for it so that 'business money' is separate from 'personal money'. You can transfer funds from one to other as you wish.
That's about it
Start off by registering as a ST & Self Assesment with HMRC:
https://www.gov.uk/set-up-sole-trader
You don't have to have a business name, but many do. It's not quite like registering a limited company & you just need to follow a few naming rules. Record keeping is pretty easy & you can probably get by with Excel at first. You need to record income of course & also any expenses incurred in the course of business. I got a separate credit card which I put all business expenses on as it makes it much easier to keep track. Don't forget that there are all sorts of expenses you can claim eg if you drive to give a lesson then the mileage can be claimed for, if you are up to the task of keeping records in that level of detail. Record the odometer reading on April 5th so you know how many miles you do in total & apportion the business costs pro rata. You might want to find an accountant when you come to do the first tax return to help you out.
One area you should look at is insurance in case a client comes a cropper & is injured. Don't forget your car insurance needs to cover you for business use as well.
https://www.gov.uk/set-up-sole-trader
You don't have to have a business name, but many do. It's not quite like registering a limited company & you just need to follow a few naming rules. Record keeping is pretty easy & you can probably get by with Excel at first. You need to record income of course & also any expenses incurred in the course of business. I got a separate credit card which I put all business expenses on as it makes it much easier to keep track. Don't forget that there are all sorts of expenses you can claim eg if you drive to give a lesson then the mileage can be claimed for, if you are up to the task of keeping records in that level of detail. Record the odometer reading on April 5th so you know how many miles you do in total & apportion the business costs pro rata. You might want to find an accountant when you come to do the first tax return to help you out.
One area you should look at is insurance in case a client comes a cropper & is injured. Don't forget your car insurance needs to cover you for business use as well.
Simpo Two said:
You have to tell HMRC that you're trading, and send in self-assessment tax return each year. Having no interest in that part I used a decent book-keeper
Then you'll be 'Woody t/a Mountain Bike Coaching' and off you go. Market, advertise, sell, get business, invoice, keep records of everything. Anything you buy for business use can be deducted from profits. Send in tax return - you can earn up to £12,000 a year so if you have no other income you won't be paying any income tax. However you may have to pay NI - I'll leave that to a forum expert.
Whilst your business is you and vice versa (ie not a separate legal entity) it helps to have a separate bank account for it so that 'business money' is separate from 'personal money'. You can transfer funds from one to other as you wish.
That's about it
I suspect you were multi tasking when you wrote this reply. The OP is pretty clear that he has a full time PAYE job, and this is a sideline. Then you'll be 'Woody t/a Mountain Bike Coaching' and off you go. Market, advertise, sell, get business, invoice, keep records of everything. Anything you buy for business use can be deducted from profits. Send in tax return - you can earn up to £12,000 a year so if you have no other income you won't be paying any income tax. However you may have to pay NI - I'll leave that to a forum expert.
Whilst your business is you and vice versa (ie not a separate legal entity) it helps to have a separate bank account for it so that 'business money' is separate from 'personal money'. You can transfer funds from one to other as you wish.
That's about it
Mr Pointy said:
Start off by registering as a ST & Self Assesment with HMRC:
https://www.gov.uk/set-up-sole-trader
You don't have to have a business name, but many do. It's not quite like registering a limited company & you just need to follow a few naming rules. Record keeping is pretty easy & you can probably get by with Excel at first. You need to record income of course & also any expenses incurred in the course of business. I got a separate credit card which I put all business expenses on as it makes it much easier to keep track. Don't forget that there are all sorts of expenses you can claim eg if you drive to give a lesson then the mileage can be claimed for, if you are up to the task of keeping records in that level of detail. Record the odometer reading on April 5th so you know how many miles you do in total & apportion the business costs pro rata. You might want to find an accountant when you come to do the first tax return to help you out.
One area you should look at is insurance in case a client comes a cropper & is injured. Don't forget your car insurance needs to cover you for business use as well.
Thanks for the info - greatly appreciated.https://www.gov.uk/set-up-sole-trader
You don't have to have a business name, but many do. It's not quite like registering a limited company & you just need to follow a few naming rules. Record keeping is pretty easy & you can probably get by with Excel at first. You need to record income of course & also any expenses incurred in the course of business. I got a separate credit card which I put all business expenses on as it makes it much easier to keep track. Don't forget that there are all sorts of expenses you can claim eg if you drive to give a lesson then the mileage can be claimed for, if you are up to the task of keeping records in that level of detail. Record the odometer reading on April 5th so you know how many miles you do in total & apportion the business costs pro rata. You might want to find an accountant when you come to do the first tax return to help you out.
One area you should look at is insurance in case a client comes a cropper & is injured. Don't forget your car insurance needs to cover you for business use as well.
I'm sorted on insurance - I get it with my Coaching Qualifications.
So it's as simple as filling the registering for self assessment via HMRC?
s2sol said:
I suspect you were multi tasking when you wrote this reply. The OP is pretty clear that he has a full time PAYE job, and this is a sideline.
You're quite right! I got as far as 'redundant'... my fault.I'll revise the income tax allowance upwards to £12,500. The rest holds up except he'll be paying income tax on all profits, unfortunately.
Woody said:
So it's as simple as filling the registering for self assessment via HMRC?
There is no requirement for a person who is starting up as a Sole Trader business to "register" with anybody.However, if you are going to have a stream of sole trader income, then you will be required to complete a Self Assessment tax return after the end of every tax year. This means you need to contact HMRC so that they can allocate to you a Self Assessment Tax Reference number (usually referred to as the SATR although confusingly, it is also known as a UTR - Unique Tax Reference). Once you have the SATR, you can then start filing your Self Assessment tax returns.
The rules say you need to notify HMRC by the 31 October AFTER the end of the tax year in which you started trading.
So, if you started today (28 January), you would be starting your business in tax year 2020/21. This means you need to notify HMRC by 31 October 2021.
You will be required to submit a tax return for tax year 2020/21 and future years.
Note that a tax return not only contains details of your trading profits, but also includes ALL other income and allowance details. This includes any salary that has already been tax under PAYE.
The deadline for filing the 2020/21 tax return will be 31 January 2022 (subject to any exceptions due to Covid 19).
One point worth noting - if you already submit Self Assessment tax returns for some other reasons (you have rental income or you need to repay some Child Benefit, for example), you already will have an SATR and you do not need another one. All you do in that case in make sure you include your self employed income on the tax return you would normally be submitting.
If you USED to complete self assessment tax returns, then stopped for a while, you can ask HMRC to revive your old SATR. Having two (or more) SATR numbers in the system can cause all sorts of hassle.
If you USED to complete self assessment tax returns, then stopped for a while, you can ask HMRC to revive your old SATR. Having two (or more) SATR numbers in the system can cause all sorts of hassle.
To consider beyond the financial and regulatory admin is insurance.
You're operating an endeavour that by its very nature has a modicum of risk and you need to protect yourself against the financial consequences of this.
Public Liability and Professional Indemnity would be needed as a minimum.
You're operating an endeavour that by its very nature has a modicum of risk and you need to protect yourself against the financial consequences of this.
Public Liability and Professional Indemnity would be needed as a minimum.
It’s worth looking at using some sort of bookkeeping software / system from day 1. It can be a bit intimidating at first but will pay off in the long run. I use Pandle (which is free) , I know people who use phone apps. The ability to easily create invoices which are then tracked can really help. I just dump all my receipts / paperwork in a box and go through it once in a while to put it on the system.
Set up a separate bank account to keep business expenditure away from personal.
A clued-up accountant can save you more than their fees by making deductions / claiming allowances which you would never have thought about.
All of your new cycling gear will be a business expense and any trips you do without clients will, I am sure, be for the purposes of training or checking out new routes / locations ....
Set up a separate bank account to keep business expenditure away from personal.
A clued-up accountant can save you more than their fees by making deductions / claiming allowances which you would never have thought about.
All of your new cycling gear will be a business expense and any trips you do without clients will, I am sure, be for the purposes of training or checking out new routes / locations ....
Eric Mc said:
There is no requirement for a person who is starting up as a Sole Trader business to "register" with anybody.
However, if you are going to have a stream of sole trader income, then you will be required to complete a Self Assessment tax return after the end of every tax year. This means you need to contact HMRC so that they can allocate to you a Self Assessment Tax Reference number (usually referred to as the SATR although confusingly, it is also known as a UTR - Unique Tax Reference). Once you have the SATR, you can then start filing your Self Assessment tax returns.
The rules say you need to notify HMRC by the 31 October AFTER the end of the tax year in which you started trading.
So, if you started today (28 January), you would be starting your business in tax year 2020/21. This means you need to notify HMRC by 31 October 2021.
You will be required to submit a tax return for tax year 2020/21 and future years.
Note that a tax return not only contains details of your trading profits, but also includes ALL other income and allowance details. This includes any salary that has already been tax under PAYE.
The deadline for filing the 2020/21 tax return will be 31 January 2022 (subject to any exceptions due to Covid 19).
Eric please tell me a charity you support and I’ll make a donation as this is a perfect explanation for a question I’m asked daily However, if you are going to have a stream of sole trader income, then you will be required to complete a Self Assessment tax return after the end of every tax year. This means you need to contact HMRC so that they can allocate to you a Self Assessment Tax Reference number (usually referred to as the SATR although confusingly, it is also known as a UTR - Unique Tax Reference). Once you have the SATR, you can then start filing your Self Assessment tax returns.
The rules say you need to notify HMRC by the 31 October AFTER the end of the tax year in which you started trading.
So, if you started today (28 January), you would be starting your business in tax year 2020/21. This means you need to notify HMRC by 31 October 2021.
You will be required to submit a tax return for tax year 2020/21 and future years.
Note that a tax return not only contains details of your trading profits, but also includes ALL other income and allowance details. This includes any salary that has already been tax under PAYE.
The deadline for filing the 2020/21 tax return will be 31 January 2022 (subject to any exceptions due to Covid 19).
I like to keep things simple, and it's worked for me for 20 years. Originally it was a weekend hobby/business while working full time. 10 years of 50:50 with part time PAYE, now full time.
My outgoings are around 25% of turnover, and I pay out and get paid right away - no credit terms.
I use a personal debit card to pay for materials etc. Maybe one order a week in normal times, plus the odd receipt for tracked postage, insurance, etc.
Customers pay me with a mix of cheque, cash and bank transfer - 3 or 4 jobs a week in normal times. All money goes straight into my personal bank account.
I have public liability, loss of goods and goods in transit insurance. Costs about £300 a year.
I use both my cars for collections and deliveries. Business use adds a couple of quid a year.
I claim the 45p a mile tax relief, as it's easier to do that than claim expenses because I use 2 different cars.
I use a computer to print out a receipt/guarantee for each customer, as I think it looks more professional than a carbon-copy receipt book.
I don't use any software for accounting etc. I just keep all the receipts and invoices in 2 piles, and a post-it note of any mileage each week.
In May or June, once I've received my pension P60s, I transfer all the mileage into a mileage log book from WH Smith, write all the receipts and invoices into a WH Smith A6 cash book, and bang the figures into the HMRC website.
The whole thing, from picking up the piles of paperwork from the workshop to completing the return, takes me less than 3 hours.
I then file all the completed paperwork, and forget about it for another year.
My outgoings are around 25% of turnover, and I pay out and get paid right away - no credit terms.
I use a personal debit card to pay for materials etc. Maybe one order a week in normal times, plus the odd receipt for tracked postage, insurance, etc.
Customers pay me with a mix of cheque, cash and bank transfer - 3 or 4 jobs a week in normal times. All money goes straight into my personal bank account.
I have public liability, loss of goods and goods in transit insurance. Costs about £300 a year.
I use both my cars for collections and deliveries. Business use adds a couple of quid a year.
I claim the 45p a mile tax relief, as it's easier to do that than claim expenses because I use 2 different cars.
I use a computer to print out a receipt/guarantee for each customer, as I think it looks more professional than a carbon-copy receipt book.
I don't use any software for accounting etc. I just keep all the receipts and invoices in 2 piles, and a post-it note of any mileage each week.
In May or June, once I've received my pension P60s, I transfer all the mileage into a mileage log book from WH Smith, write all the receipts and invoices into a WH Smith A6 cash book, and bang the figures into the HMRC website.
The whole thing, from picking up the piles of paperwork from the workshop to completing the return, takes me less than 3 hours.
I then file all the completed paperwork, and forget about it for another year.
clockworks said:
I like to keep things simple, and it's worked for me for 20 years. Originally it was a weekend hobby/business while working full time. 10 years of 50:50 with part time PAYE, now full time.
My outgoings are around 25% of turnover, and I pay out and get paid right away - no credit terms.
I use a personal debit card to pay for materials etc. Maybe one order a week in normal times, plus the odd receipt for tracked postage, insurance, etc.
Customers pay me with a mix of cheque, cash and bank transfer - 3 or 4 jobs a week in normal times. All money goes straight into my personal bank account.
I have public liability, loss of goods and goods in transit insurance. Costs about £300 a year.
I use both my cars for collections and deliveries. Business use adds a couple of quid a year.
I claim the 45p a mile tax relief, as it's easier to do that than claim expenses because I use 2 different cars.
I use a computer to print out a receipt/guarantee for each customer, as I think it looks more professional than a carbon-copy receipt book.
I don't use any software for accounting etc. I just keep all the receipts and invoices in 2 piles, and a post-it note of any mileage each week.
In May or June, once I've received my pension P60s, I transfer all the mileage into a mileage log book from WH Smith, write all the receipts and invoices into a WH Smith A6 cash book, and bang the figures into the HMRC website.
The whole thing, from picking up the piles of paperwork from the workshop to completing the return, takes me less than 3 hours.
I then file all the completed paperwork, and forget about it for another year.
Rather than buying mileage log books and cash books why not just use Excel? There are umpteen benefits but, If nothing else, it saves you having to do the adding up.My outgoings are around 25% of turnover, and I pay out and get paid right away - no credit terms.
I use a personal debit card to pay for materials etc. Maybe one order a week in normal times, plus the odd receipt for tracked postage, insurance, etc.
Customers pay me with a mix of cheque, cash and bank transfer - 3 or 4 jobs a week in normal times. All money goes straight into my personal bank account.
I have public liability, loss of goods and goods in transit insurance. Costs about £300 a year.
I use both my cars for collections and deliveries. Business use adds a couple of quid a year.
I claim the 45p a mile tax relief, as it's easier to do that than claim expenses because I use 2 different cars.
I use a computer to print out a receipt/guarantee for each customer, as I think it looks more professional than a carbon-copy receipt book.
I don't use any software for accounting etc. I just keep all the receipts and invoices in 2 piles, and a post-it note of any mileage each week.
In May or June, once I've received my pension P60s, I transfer all the mileage into a mileage log book from WH Smith, write all the receipts and invoices into a WH Smith A6 cash book, and bang the figures into the HMRC website.
The whole thing, from picking up the piles of paperwork from the workshop to completing the return, takes me less than 3 hours.
I then file all the completed paperwork, and forget about it for another year.
Countdown said:
Rather than buying mileage log books and cash books why not just use Excel? There are umpteen benefits but, If nothing else, it saves you having to do the adding up.
The books last for about 5 years - I don't use new ones for each year.I'm happy using computers for most things, but I do prefer having important stuff on paper.
Also, the adding up is the bit I quite enjoy. Keeps the brain ticking over.
Probably just force of habit though.
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