A4G LLP
Kings Lodge, London Road,
West Kingsdown Nr. Brands Hatch,
Kent TN15 6AR

Phone: 01474 853 856 Fax: 01474 852 456
Email: steve@a4cc.co.uk

Trading as a sole trader

 

How else can we help your business?

 

To speak to one of our team of specialist accountants and advisers call us on (01474) 853 856 or view the relevant links on this page for further information.

 

"Accountants 4 Construction Consultants have come up with viable solutions through our business structure to overcome these problems, while still allowing you to benefit from the many advantages of trading as a sole trader."

Some of the problems of trading as a sole trader to consider:

 

Unlimited liability

As a sole trader you are personally liable for the debts of the business. Were the business to fail for any reason you could be required to sell your personal assets, such as your car or home, in order to meet any unpaid debts. There is a particular risk in the situation where the business is successfully sued for any reason, as the cost of this can be extremely high and the profitability of the business does not affect the amount that can fall due.

 

Higher taxes

Limited Companies are in most cases more tax efficient than trading as a sole trader, and you are likely to be able to benefit from savings on an annual profit of over £15,000. One of the reasons for this is that you are able to avoid the need to pay National Insurance contributions by trading through a Limited Company, but are still entitled to state benefits. With the rate of corporation tax falling in 2011, trading as a Limited Company has become even more attractive.

 

Taxed on retained profits

Current tax rules mean that you are being taxed on all the profits earned by the business during its accounting period. However, you may decide to leave some of this profit within the business to finance its day to day running or to provide for any future expenditure. As a sole trader you will be required to pay the same level of tax regardless of whether you take all of your profits or not.

 

Payments on account

HM Revenue & Customs require you to make payments in advance towards your tax liability for the following year, which is paid in two instalments with each instalment being 50% of the tax due for the prior year. This can cause cash flow problems for businesses where income has fallen from that of the previous year, as it can be slow to receive a refund from HM Revenue & Customs if your payments on account have already been paid.

 

Double taxation

Due to the tax rules in place for new sole traders you could find yourself in a situation where you are taxed twice on some of your income. The income that you have been taxed on twice is recorded on each of your future tax returns and you can obtain relief for this at the point you cease to trade. However, this could be many years in the future and the relief does not take into account the fact that the value of money decreases over time. £1,000 of additional tax paid now could result in you being repaid £1,000 in 30 years time!

 

Accountants 4 Construction Consultants have come up with viable solutions through our business structure to overcome these problems, while still allowing you to benefit from the many advantages of trading as a sole trader.

 

To speak to one of our team of specialist accountants and advisers call us on (01474) 853 856 or view the relevant links on this page for further information.