Self-Employment Accounts & Taxation
When you decide to run your own business and become self-employed, it is important to contact the Tax authorities early on. You need to register as self-employed and consider how to pay the Class 2 National Insurance contributions. There is a lot of help on the HMRC website, or of course you can ring Astons Accountants if you want to talk this through in more detail.
The business is run by an individual and you need to record your own income and expenditure as the business gets up and running.
It is the simplest form of business, to learn about, to run and to finance. As it is the simplest form of business it is the cheapest to run and administer.
The business generates income (sales), pays out expenses (costs) and the excess of income over expenditure is the profit. You then show that profit on your personal tax return, and pay tax based on the profit.
Although it is the simplest and cheapest format for a business, it is usually not as tax-efficient as a partnership or limited company. There are some people (often those who have been self employed for a while) who are still better sticking with being a sole trader. The flexibility and ease with which money can be spent for personal use, can out-weigh the need to save additional tax.
What To Think About
The main things to think about are:
- Keeping on the right side of the Taxman
- Maintaining proper accounting records
- Any need for, or benefit from, registering for VAT
- Expenses that can be claimed
If you want to know more or talk about your specific situation, call us and we will talk it through with you.