Self-employment requires an enormous amount of effort and determination, but there are many advantages of being a sole trader. From financial benefits to having charge of your daily routine, Account Ease is looking at the many reasons why you should think about making yourself as your self-employed boss.
As sole-trader accountants We’re available to assist you with any questions you might have regarding this business structure and we’re happy to talk to you anytime.
Is Self-Employment for You?
Many people dream of joining the five million self-employed workers in the UK However, it’s crucial to think about a few factors first.
Being a solo entrepreneur can be a daunting task, especially since you’re not guaranteed a income at the end of the month, as the ones you earn when employed. It’s essential to get through this challenge to not allow it drag you down, particularly at the beginning.
You must also be motivated by your own self because you’ll be accountable for all aspects of the business. This includes finding new jobs and marketing yourself. If you are doing the actual work it is essential to be organized and disciplined. You have to be able to complete every task without being instructed on what you should do.
For some, this can be an exciting option because it allows them to have the freedom they desire in their career, but Others may find it intimidating. If you love to be able to manage everything on your own and be in charge of every aspect, then self-employment could be the right choice for you.
In the end, the numerous benefits of the sole trader makes the whole process worthwhile.
Earning Potential is Higher
The main reason why people choose to establish a company is that they can earn more money than they would if they are employed. If you work for a company they pay you a set wage and can only be raised up when you get promotions, raises, or simply wish to negotiate more. If your company is doing well, you might not see it reflect in your pay.
When you’re self-employed however, you can set your own rates that is contingent on factors such as the market and your expertise may be more. Technically speaking, there’s no limit on the amount you can earn, which makes self-employment a highly appealing alternative in the eyes of professionals, developers, landlords, and a myriad of other people.
If your company is able to increase profits and your earnings will increase as well. Naturally, it could be a while before you increase your earnings however, the potential for scaling is huge.
You Make Your Own Schedule
Another advantage for sole traders is flexibility. The flexibility of your schedule and hours lets you work when you’re the most productive and innovative – for certain people, this happens early in the day, while for others it’s at night. You’re able to take any breaks you consider required, which is a choice you’re not likely to get working full-time.
This is also true when it comes to holidays. You can have breaks whenever you wish to spend quality time with your loved ones and family. However, to do this you need to be organized and realistic in regards to your work load. It is possible that you won’t be capable of taking a break right away when you’d like or to work more hours when you’re starting your own business, for instance.
Set your goals for work-life balance and begin working towards them right from the beginning. The ability to delegate tasks, like your accounting, will allow you to get more time to spend with you, your family members or your company, as we take the administrative burden off of you as contractors accountants.
You Choose Who You Work With
This is another important aspect that makes being a self-employed. If you establish your own business, you have the ability the freedom to pick what you’re doing, meaning that you do not have to undertake projects that you do not like or collaborate with people that who you don’t want to collaborate with. If you’re employed you aren’t able to choose your coworkers, and might never be in a position to take any hiring or firing choices.
The disadvantage of working for yourself is that many are lonely because they don’t have colleagues who they can talk to during the day or share ideas with. This is the reason it’s crucial to join groups of peers and connect with other professionals within your area of expertise. It will allow you to be in contact with others and not feel as if you’re in the dark.
No Day’s the Same
If you’re looking for the same routine every day and out, working for yourself might not be the right choice for them. If you’re a sole-trader you’ll have a variety of projects to work on and work can be varied and you’re unlikely to be bored. You can vary your work schedule if you wish, pick an area of work to focus on, and many more.
Although being a self-employed person isn’t without risk (for instance, you might not be guaranteed a pay every month or could make costly decisions regarding your business) however, it could also offer you job security. You don’t have to be worried about being fired since you are your own boss, and you don’t need to worry about pursuing an increase or getting rejected because of it.
If you are working on multiple projects, you won’t need to be concerned about losing contracts. Therefore, job security could be both a benefit as well as a disadvantage when you are a sole-trader dependent on the circumstances.
It’s Easy to Become a Sole Trader
There’s not much administrative work involved with being sole trader. In fact, you just need to inform HMRC that you’re self-employed by registering yourself as sole trader, and selecting the name of your business. It is required to file an self-assessment tax return also, as that’s how you’ll be required to pay taxes.
The second thing you need to be able to keep precise record of your expenses as well as sales. When your revenue is greater than the £85,000 threshold, then you need to sign up for VAT.
If you can meet the requirements the rest is good to start. This type of structure is an excellent option for those looking to test their feet into self-employment, without creating a limited company that comes with more paperwork and administration and greater responsibility.
More Tax Benefits
When you’re employed, pay tax through PAYE and don’t need to worry about anything. As a sole-trader you are required to pay the correct amount of tax on your own this is why it’s crucial to keep a detailed record of everything. But don’t let this discourage you, particularly as an expert accountant will be able to assist you in completing your self-assessment tax return to ensure your tax return is correct and timely.
In the end, if you’re a sole trader you’ll keep all post-tax earnings. There’s no need to share these with shareholders or any else (unless you’re a partner) which means you could be able to earn some substantial sums of cash.
It is also possible to avoid the IR35 requirement if you’re a sole-trader, since this law doesn’t apply to this type of business form.
Another benefit for sole-traders is the fact that they are taxed on their earnings. This means you are able to use allowances and expenses to lower the amount of profit and, in turn, decrease your tax bill. have to pay. It is possible to claim reimbursements for utilities, office supplies when you work at home, use fuel and many more. You should keep track of there are any expenses that prove you are able to claim for specific items.
We’ll help you figure out the amount you’re entitled to be entitled to, so get in contact Account Ease today to learn more.
The lack of needing to register to Companies House is another sole benefit of trading for many. It is easier to keep your business private with this type of structure since you do not have to disclose information about your accounts. The HMRC’s rules on taxpayer confidentiality state that the private information you provide will not be made available to the general public, meaning that your rivals won’t be able to view the information as well.
However the limited companies have to create public records that are able to be viewed by anyone using Companies House’s website. Companies House website.
Should You Incorporate?
There may come a point when you’re unsure if changing your sole trader company to a limited-company is the best option. There are many benefits of having a limited company, for instance, the fact that you’re not liable for any debts your business could incur since you’re considered distinct apart from your business.
The incorporation process can also be tax efficient since directors of companies are able to pay themselves a modest salary and get the remainder in dividends. They’re paying less national insurance tax. As an owner of a limited company, you pay 19% profit tax, while sole traders pay higher (from 20 up to 45 percent, based on the amount they earn).
As accountants for limited companies we can assist you when you decide to incorporate your business, because we will take on the administrative load while you concentrate on the business.
You Can Take Advantage of Government Support
This could be the ideal moment to jump on the bandwagon to become self-employed. The government recognizes that the coronavirus outbreak has created difficulties for people and businesses all over the country, including those who work for themselves, and is working to ease the burden for many.
For instance, if you are unable to pay your self-assessment tax on time due to an epidemic, then you might be able to pay by instalments, allowing you to spread the cost over many months. This is a great way to help individuals to continue their business.
Contact us if you’re not sure which grants are available in your particular circumstance.
How Can Account Ease Help?
There are so many advantages of being a sole trader, this is the most common business structure that people select when they decide to be self-employed. And we’re with you all the way. Making the leap to self-employment can be a daunting experience and when you’re trying to figure out how to run and expand your business, it’s stress-inducing to dedicate time in your schedule to handle your finances.
This is a demanding task to complete, and even one small error could lead to issues with HMRC. We at Account Ease , we take the burden of managing and ensure that your tax returns are filled properly, giving you peace of mind you require to concentrate on your daily routine.
With Free-Agent, our Free-Agent Accounting software, you do not have to manually record anything. The tool is accessible anytime regardless of where you are, allows you to keep track of your finances. It also gives you the ability to view your financial accounts. This can help you make informed business decisions as well as to keep your finances in order when it’s time to file the tax return.
Contact us at 0208 133 4599 to find out more about our offerings in order to assist you maximize your tax efficiency as sole trader.