Reply to: Setting up as a sole trader help

[Support Monkey]

There is also one other very important fact, as a sole trader you are personally responsible for everything and as such if you mess up and forget to pay your tax or have any other issues it comes back to you personally

Within a Limited its the company thats responsible and yes as the director you are responsible for the running of the company but its a lot cleaner way of operating, keeping business and personal money seperate rather than having every penny you earn in one big pot.

How can you manage your money to not go into the higher tax bracket? if your limited just pay yourself less dividends but as a sole trader every penny is counted from day one

[THEPUMA]

If you trade as a sole-trader via an agency, the agency should deduct PAYE and NI from your earnings unless you are not controlled in the work that you do. Most agencies are unable or unwilling to make that call and will therefore insist you operate via a limited company to protect them against this tax exposure.

It sounds to me as though your agency are just unaware of this rule, but I could be wrong. In which case it's probably not your problem.

But you may not be so lucky on your next gig and in any event if you are earning more than say £30K per annum and not caught by IR35, a company tends to be beneficial from a tax perspective in any event (depending on the level of accountancy fees and at what price you value your time).

Puma

[northernladuk]

All,

If you read my other newbie thread, this one is related. I have decided the best route for what I am doing will be setting up as a sole trader. What benefit do I get from using an accountancy company like sjd?

They offer a £30 a month package but as far as I can tell, all they do is tell me what forms I need to fill in (which as far as I can see is just the one CWF1 HMRC form), and remind me to pay my tax - But if HMRC send me a tax return form next April, why do I need to pay an accountant to remind me?

Is it as simple as:

Get contract (done)
Fill in CWF1 form (done)
Invoice the client to pay me directly (to my current account or cash account)
Keep a full record of all business expenses (will literally just be mileage and food)
Finish my contract and wait for HMRC to send me the tax return form - At which point I will declare whatI have earned in my permie position + what I have earned as a sole trader, and declare my tax deductable expenses?

Am I missing anything?

If not then there's no point paying for an accountant is there?

Thanks again for the help...

That question alone answers the one below it IMO....

[Alan @ BroomeAffinity]

[QUOTE=GB2408;1176073] Their fee is 100% tax deductable [\QUOTE]

No its not. Its an allowable expenses, which means your profits reduce accordingly, and the tax saving is only at the prevailing tax rate. 100% of the fee does NOT come off your tax bill. Reading your post would suggest you were under that impression. If I'm wrong, sorry. If I'm right you DEFINITELY need an accountant.

[lje]

I think I've decided to just use an accountant - Their fee is 100% tax deductable so may as well use them even if to just answer the odd question I have and to help with the odd expenses.

The bit that is getting me is mileage - I will be travelling most of the time to a couple of sites but apparently I can't claim the mileage for these as they are "regular".

Frustrating... There are so many conflicting opinions and advice on the web.

Not sure if being a sole trader changes things but from a Limited Co point of view you are OK claiming mileage if you have been working at the temporary location for less than 2 years (note that there can be different clients in the same location - eg centre of London is one location). This includes the work you did before you started doing this contract.

You are also OK claiming mileage if it goes over 2 years but during the past 2 years you have not spent more than 40% of your time in a particular location.

[GB2408]

You don't legally need an accountant - and neither does a limited company. I do my own accounts for my limited company and that's fine if you know what you're doing.

The thing to ask yourself is whether you are happy doing the bookeeping side and keeping on top of changes (I secretly enjoy it ). If so then do it yourself as sole trader is quite simple.

I think I've decided to just use an accountant - Their fee is 100% tax deductable so may as well use them even if to just answer the odd question I have and to help with the odd expenses.

The bit that is getting me is mileage - I will be travelling most of the time to a couple of sites but apparently I can't claim the mileage for these as they are "regular".

Frustrating... There are so many conflicting opinions and advice on the web.

[GB2408]

You should ask him what happens if you are caught as a deemed employee working as a sole trader.

I'm delivering an agreed service for a set fee - Not really a day-to-day employee is it?

[SackmanandCo]

Nothing wrong with sole trader route- can still be vat registered. Generally speaking, for higher rate tax payers it is more efficient from a tax angle to trade as a limited company.

A lot of self employed p[eople do their own tax return. From what I have seen, some are better than others. HMRC are opening up more tax enquiries, so some caution is needed.

[Stag Cozier]

Just had a conf call with the client - I asked if he's happy for me to be a sole trader and his response was "No problem at all for me, that means you won't be claiming VAT right? Yeah no worries".

Do I legally need an accountant? I know you do for a Ltd company.

You should ask him what happens if you are caught as a deemed employee working as a sole trader.

[lje]

Just had a conf call with the client - I asked if he's happy for me to be a sole trader and his response was "No problem at all for me, that means you won't be claiming VAT right? Yeah no worries".

Do I legally need an accountant? I know you do for a Ltd company.

You don't legally need an accountant - and neither does a limited company. I do my own accounts for my limited company and that's fine if you know what you're doing.

The thing to ask yourself is whether you are happy doing the bookeeping side and keeping on top of changes (I secretly enjoy it ). If so then do it yourself as sole trader is quite simple.

[northernladuk]

I'm sure anything an accountant can tell me I can find out for myself Seems that the sole trader route is very simple indeed.

So how come you are asking on here? I would be wary of the that comment. Google is full of garbage as well... for example most of my posts can be found on it so that gives it a black mark for a start lol.

[Clare@InTouch]

Thanks Clare. I thought I had to do the NI form but wasn't sure so I was going to contact HMRC today.

I won't be going mad with expenses. Just the basics - Mileage from home to site & return. And up to a tenner for the evening meal.

So I should go it alone? I am a comprehensive googler, I'm sure anything an accountant can tell me I can find out for myself Seems that the sole trader route is very simple indeed.

It is simple, and you may be absolutely fine. I'd still suggest you get an accountant to check everything at least for the first year though, just to be sure - they may also point out things you're not claiming that you could, thus saving their fee in tax. You can then go forward on those principles :-)

This is assuming the agency will allow it of course, in my experience they usually refuse to deal with self employment!

[GB2408]

You'll also need to register to pay Class 2 NI - http://www.hmrc.gov.uk/leaflets/se1.pdf

Go careful with expenses too, they are not always the same across the board. What you can claim as a brolly employee is not the same as you can claim as a self employed person. Food, for example, is not always allowable if you're self employed.

The Carpenter’s Lunch – Subsistence Expenses for the Self-Employed

Thanks Clare. I thought I had to do the NI form but wasn't sure so I was going to contact HMRC today.

I won't be going mad with expenses. Just the basics - Mileage from home to site & return. And up to a tenner for the evening meal.

So I should go it alone? I am a comprehensive googler, I'm sure anything an accountant can tell me I can find out for myself Seems that the sole trader route is very simple indeed.

[Clare@InTouch]

I have informed the agency this is my plan and he did not object but I am just going to double check with the client.



Hi Clare,

I am used to keeping a track of expenses whilst away on business for my permie role - But for this contract role the only expenses I would have would be mileage and food.

So if I am able to happily keep track of my own expenses, and I know the correct forms to fill in for HMRC initially (CWF1? any others?) then I'm good to go? If my tax return at the year end is too tricky I always have the option of asking my Nan or Auntie to help as they have done tax returns and book keeping in the past!

You'll also need to register to pay Class 2 NI - http://www.hmrc.gov.uk/leaflets/se1.pdf

Go careful with expenses too, they are not always the same across the board. What you can claim as a brolly employee is not the same as you can claim as a self employed person. Food, for example, is not always allowable if you're self employed.

The Carpenter’s Lunch – Subsistence Expenses for the Self-Employed

[GB2408]

Bet he comes back and says you need a limited company or go brolly. If he doesn't then I'd possible rethink about the agency

Just had a conf call with the client - I asked if he's happy for me to be a sole trader and his response was "No problem at all for me, that means you won't be claiming VAT right? Yeah no worries".

Do I legally need an accountant? I know you do for a Ltd company.