Setting up as a sole trader

Image via Wikipedia

"How do I set up as a sole trader?"

It's a question often asked and it's something I've done a few years ago. This gives me the opportunity to share my experiences and hopefully help and encourage others wanting to take this step. I'll provide information in the form of questins and answers.

"How do I set up as a sole trader?" - Simply get on the phone and call Her Majesty's Revenue and Customs. Answer a few questions and Bob's your uncle, sorted! It really is that easy.

"Do I have to tell my current employers?" - Not necessarily but it would be polite and prudent to. Think about whether your operating as a sole trader is going to impinge upon your work for your employer. If it does then you'll definitely need to tell them.

"Do I need a seperate bank account?" - No. You can use your current account or a pillow case under the bed should you so desire. But it makes it so much easier to have a purpose business account. There are many available today, some fully featured and even free of charges. I personally use the Business account from the Abbey National. Debit card plus no charges. Within certain limits of course!

"Will I have to fill in a tax return?" - Yes. If you've been on PAYE all your life then chances are you may never have seen a tax return. But you soon will, oh yes!

"Do I need an accountant?" - No. You can do it all yourself and just fill in your tax return online. I intended to do that until I actually saw my tax return. Then the services of an accountant become strangely appealing.

"What about national insurance?" - If you think you may not be earning much for the coming year then maybe worth applying for a small earnings exception to the Class 2 NI contributions.

"What records should I keep?" - Keep invoices, quotes, receipts and record monies in and out.