Sole trader

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Setting up a sole trader is the simplest and most straightforward way to trade.

There is no requirement to file the accounts at Companies House. All you need to do is to inform HMRC that you, the individual trader, is self employed. Notification must be made by 5 October following the end of the tax year (the tax year for individuals runs from 6th April to 5th April).

An annual self-assessment tax return will need to be completed for income tax and Class 4NICs and sole traders and partners may need to make payments on account every six months in respect of their tax and National Insurance contributions.

NIC Class 2 National Insurance Contributions (NICs) are payable by all self-employed people (sole traders and Partners). In addition, Class 4 NIC are payable by self-employed people when profits reach a certain limit.

If an individual believes that his contributions are too low and would like to preserve entitlement to basic state benefits (eg state retirement pension) then he/she can elect to pay Class 3 NIC. This is a voluntary contribution.

A person who retains employment as well as pursuing self-employment as a trader is still liable for tax on the employment income under the PAYE system operated by the employer.

Read more here.

Pinacrown Consulting offers a comprehensive range of company administration services for sole traders in London

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