I’m a sole trader – do I need an accountant?

Being a sole trader involves running your own business as an individual on a self-employed basis.

Having sole trader status will allow you to retain all your business’s profits each year once you have paid the taxes due on them. The flip side is that you are also personally responsible for any losses and liabilities you incur.

What are my duties and responsibilities?

As a sole trader, it is just you in the business, so you have the responsibility of managing every aspect, whilst also keeping business records.

This will range from pitching to prospective clients, carrying out the work, managing client relations, billing, and record-keeping – and this is all before having to deal with your tax returns.

Do I need an accountant as a sole trader?

No, you don’t necessarily need an accountant as a sole trader, but it can help to have support from an experienced professional. Basic financial administration, like bookkeeping and invoice reconciliation, is not difficult, but it does take time. Moreover, certain areas of accounting, like tax and VAT, can be more complex and require an advanced understanding to remain compliant with the law.

A sole trader can take on the accounting function of their business, but many do not have the time or appetite to do so. Hiring an accountant can, therefore, help a sole trader achieve much greater efficiency.

Why turn to an accountant for help?

For sole traders, the main benefits of using an accountant are:

1. Being able to spend more time on other parts of your business: the more time spent on admin means the less time spent on delivering your services or growing your business.
2. Less chance of mistakes in filing tax returns: it’s easy to make a mistake, especially if you’re not familiar with the ins and outs of self-assessment, and a mistake could be costly.
3. Using the expertise to ensure you are minimising your tax liability: accountants are experts on tax law and keep up-to-date with the latest changes to ensure you pay no more than you owe.
4. Peace of mind: simply knowing that your accounting obligations are taken of can be a great source of comfort, especially when you’re busy juggling other tasks.

Services that accountants can provide for sole traders

Bookkeeping and maintaining records

Throughout the year, all businesses undertake activity that usually involves paying expenses and generating income. It is essential to maintain proper books and records so that ultimately, the necessary filings for taxes can be made.

Whilst some sole traders are happy to carry this out once a year in line with their tax return, as a business scales, so might the need to keep a finger on the pulse when it comes to updating financial information.

Accountants can provide bookkeeping services that assist with the admin burden of running a business so that there is not a mad scramble at the year end to gather the required information.

VAT Registration

Once a business forecasts that it will generate revenues of at least £85,000 in the following 12 months, it may be that the business needs to register for VAT and submit quarterly VAT returns to HMRC.

Accountants can help navigate the rules for you and take away the stress of registering for VAT and preparing the subsequent quarterly returns whilst providing advice on the timing and technical tax knowledge of what is and is not appropriate for VAT.

Tax Returns

The main duty of a sole trader to remain compliant with tax laws is to file a tax return annually with HMRC to report profits and make the appropriate tax and national insurance contributions on these profits.

These forms can be complex and time-consuming without the necessary expertise. An accountant can take this burden away to allow a business owner to concentrate on what they do best – run their business!

Tax Efficiencies

As well as the obvious time saving that can be achieved through using an accountant to file tax returns, an accountant can also ensure tax savings are made, which might otherwise have been missed.

What else can an accountant help with?

Accountants can also help in other ways. They are often used as business advisors, rather than just somebody to fill in your tax returns. So, along with preparing your annual tax return, an accountant can support you across a variety of services that go beyond compliance, including:

• Strategic advice and guidance to see where your business is headed
• Ensuring that the structure of a sole trader business is right for you
• Tax planning advice related to both the business and your personal circumstances

Choosing the right accountant

Should you decide that retaining the services of an accountant is the right thing for your business, you will want to choose the accountant that best fits you and your business. Whilst price is, of course, a significant factor in this, it should not be the only consideration.

Having a responsive and trustworthy accountant is a vital building block to building a lasting relationship that ensures your business is always running efficiently, is future-proofed and makes the most of the opportunities presented.

If you are looking for support, contact our specialist accountants for sole traders to book a free initial consultation.