Sole trader accountant- Do you need one?

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    Sole trading has become a go-to business option in the UK lately. According to the statistics, there are 5.6 million private sector businesses, and out of the, 3.2 million are sole proprietorships. The sole traders’ numbers are increasing rapidly in the UK.

    While these statistics and everything looks good, the hustle and efforts that sole traders put in is something else.

    This blog post will help you understand the importance of delegating tasks to professionals.

    Sole trader accountant

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    What is a sole trader?

    First things first, let’s understand what sole trader means.

    A sole trader means a person running an entire business, which can also be considered self-employment. That one person will be donning various hats: the business, the boss, accountant, marketing manager, sales executive, and every other hat needed to run a business.

    Check out our blog post : How to start a small business at home

    That person will take all the business profits after paying the tax. It is what makes sole trading unique. However, they are liable for any losses and bear them alone.

    A sole trader is one of the most simple business structures out there. It has its own set of tax rules set by HMRC and needs an exclusive trader accountant to ensure that they follow all the rules.

    See our detailed guide on : what is a sole trader?

    Does a sole trader need an accountant?

     So, a sole trader manages every aspect of their business, which may tire them at times. Apart from that, if that person isn’t good with numbers, there are high chances of errors in the work, and they can’t afford that either. It is one of the reasons why they need a specialist accountant.

    You know the accountants for sole traders offer tailor-made services to sole owners alone, and this is the area of their expertise. Delegating the tasks to them will provide a mind of peace to the traders. They can work on other core tasks of their business without hustling their way through the numbers.

    Here are some more benefits of hiring a sole trader accountant. Planning to go for a sole proprietorship, then make sure to read this entire article.  

    See : different types of business models.

    1.    Get the basics right

    With the internet in your hands, you can know everything about starting the business, but what about the taxes part and the business jargon you aren’t aware of or familiar with?

     The internet has made every type of information accessible easily, but it is often quite conflicting and can confuse a novice in this field. If you want to get the basics and your finances right, you need an experienced accountant. There is a particular procedure to set you up as a sole trader.

    So, getting help from a professional accountant is essential. They will handle all the setup of your business according to HMRC rules.       

    Check our guide on : Working from home? Are you eligible to claim tax relief in 2021?                                                                                                           

    2.    Recording the money

    Once you have done your basics right, it is time to get to the business. Cash flow is essential for managing and scaling a successful business.

    You must record cash inflow and outflow accurately. There are two methods available to record transactions, accrual and cash.

    Under the cash method, you record transactions when cash is paid or received, whereas under the accrual method, you record transactions when they occur.

    You can use one method for standard accounting and the other method for VAT only. It may sound complex, but it can have cash flow benefits if you offer a more extended credit period to customers.

    Check our guide : Small Business Accounting 101: A Guide for New Entrepreneurs

    One mistake in your tax filing can result in huge penalties. This is not something that businesses can afford.

    On top of it, you should file taxes before the deadline set by the government, or else you will be penalised.

    Although you try and keep up with all the transactions, filing taxes won’t be easy. Just understand one thing- tax is a complicated subject, and the UK has one of the longest tax codes in the world.  Accountants spend years understanding these tax concepts and do overtime to keep up with the HMRC rules.

    They are professionals with a clear idea of what to do and what not to. Investing in a sole trader accounting service is the right and, of course, the easiest way to get your taxes done. 

    Here are some : top budgeting tips for small business

    3.    No need to research terms

    Understanding some terms and financial documentation is challenging and time-consuming if you are not from a financial background. You have to do ample research.

    But an accountant is already familiar with all of these terms and documentation. They can fill out the paperwork quickly and even make you understand these terms without a lot of research.

    Check our blog post on : Beginners Guide to Growing your Business.

    4.    Save money with tax deductions

    Opting for a self-employed accounting service may seem like an investment, but do you know you can get a tax deduction for it. Yes, HMRC has provided tax deductions on certain expenses that usually businesses have to bear, and one such expense is accountant salary.

    You can outsource, hire someone or get a freelancer to complete the work. The amount you pay is tax-deductible. HMRC provides tax deductions on various expenses for small businesses, and an accountant will have a clear idea about it. You are saving up huge despite investing in an accountant.

    Here is the extensive list of small business tax deductions in the UK (2022)

    Tasks sole trader accountant will do for you

    An accountant can help the sole trader with various tasks. If you hire one right when you start the business, they will guide you through different situations.

    1.    Self-assessment tax return

    You must file a tax return if you earn over £1,000 in a tax year.

    You must register with HMRC for self-assessment, get a UTR, prepare profit and loss workings, compute all deductions, and submit a tax return within the due date.

    Know about : Self Assessment Tax Return – File Your Tax Now

     A sole trader accountant can help you with the registration process, and once a financial year is over, that person will file your taxes without you worrying about it. HMRC has deadlines to file these taxes, and you have to abide by them strictly.

    Check our guide on : guide to submit a Self Assessment Tax Return.

    2.    Contribute to national insurance

    Like employed persons, self-employed or sole traders also contribute to the national insurance. There are two classes NICs, Class 2 NIC and the Class 4 NIC.

    • Class 2 NIC- A sole trader pays £3.05 per week if they earn more than £6,515 during the tax year.
    • Class 4 NIC- A sole trader pays 9% of their annual profits between £9,568 and £50,270, and an additional 2% once they cross this profit bracket.

    3.    VAT

    The VAT registration threshold in 2022 in the UK is £85,000. Businesses with annual vatable supplies exceeding this threshold must register for VAT.

    However, how to calculate VAT, which method to use for VAT accounting- cash or accrual, what records to keep as a VAT registered business and are there any VAT schemes to join? What about VAT planning?

    An accountant will answer all these questions.

    4.    Bookkeeping

    As a business owner, you have to see whether you are making a profit or incurring a loss. The books need to be adequately maintained to file taxes with ease.

    An accountant will help you with the bookkeeping. They will do everything from recording transactions to creating balance sheets and filing taxes. You can relax and let them get to work.

    Apart from these, an accountant can also help you with

    • Pricing your products correctly with taxes
    • Support with budgeting
    • Preparing grant applications and funding
    • Identifying which products are making a profit and which are loss
    • Inventory management
    • Fixed assets management
    • Payroll, if you have employees

    Read our guide on : what is bookkeeping? 

    How to choose the right accountant?

    Choosing the right accountant is essential for your business. Remember that anyone can call themselves an accountant as it is not legally protected. Always opt for a Chartered Accountant or certified accountant with valid credentials to do your sole business accounts.

    Price is important but never go for something cheap; the price-quality equation is essential. Do ample research; with everything available online, you can check for references, testimonials and then go to the next step. Remember that you need someone who has experience as a sole trader accountant to understand your business in a better way.


    Establishing and maintaining a business all alone is not an easy task. There are various tasks where you need help from professionals, and finance is one of them.

    Once you hire an accountant, you can get rid of various tasks from your plate. As said above, they will help you with all the things related to your numbers and beyond.

    You can also go for the best accounting software for a sole trader, such as Xero. This software can help you with bookkeeping, creating balance sheets, etc.

      Learn more about Accounting , Bookkeeping and Tax

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