10 Top Tips for Sole Traders

  1. Claim for All Your Business Mileage

Make sure you claim for all business mileage completed in your own car. Business mileage can be claimed at 45p per mile for the first 10,000 and 25p per mile for any additional mileage. If you have difficulty remembering to keep a record of this, consider getting a mileage tracker app. For more information on these take a look at our recent post on Mileage Tracking.  


  1. Claim for Working from Home

If you are working from home, make sure you make a claim for use of home as office to cover your costs. HMRC allows for a simplified flat rate claim for those working from home more than 25 hours per month. You can claim:

  • £10 for 25-50 hours per month
  • £18 for 51-100 hours per month
  • £26 for 101 or more hours per month

This flat rate does not cover telephone and internet costs so these will need claiming separately.

Alternatively, you can claim for your actual costs however this is more complex. If this is something you need help with, please contact us to discuss it in more detail.


  1. Shop Around to Save Money

When it comes round to renewing your business insurances, van insurance, mobile phone contracts etc., don’t just accept the renewals from your existing providers. Use one of the many comparison websites to shop around and make sure you are still getting the best possible deal.


  1. Watch Out for the VAT Registration Threshold

Most people are aware that there is a threshold at which you have to register for VAT, but did you know that this should be looked at on a rolling 12 month basis, not just at your year end? You should be recording your monthly income and keeping a running total of the past 12 months turnover. If at any point this 12 month total exceeds the registration threshold (currently £85,000), or if you expect your turnover to be more than the current threshold in the next 30 days alone, you will need to register for VAT.


  1. Put Money Aside for your Tax Bill

If you can, try opening a separate savings account for your tax bill and put some money aside each month, so it’s not so much of a shock come January. If you are new to being self-employed, you may not know that you may need to make a payment on account for the next year with your January tax bill and then again in the following July. You can read more about payments on account here


  1. Keep on Top of Your Books

When you’re busy it’s not always easy to keep up with your record keeping but having a good understanding of how you are doing financially can be a big help. Up-to-date books allow you to prepare for your tax bill, keep an eye on how close you are to the VAT registration threshold, be aware of any potential cashflow issues and can be helpful if you require figures for finance purposes. If you are not VAT registered you can complete your books in a cashbook or on a spreadsheet, if you are VAT registered and are required to submit under MTD you may want to consider cloud software. Read our recent post about the 8 benefits of cloud accounting.


  1. Invoice Quickly & Chase Payment Regularly

Once you have completed a job try to invoice quickly and make sure your invoice clearly states your payment terms and how to pay. Once the payment becomes due make sure you follow up and keep following up at regular intervals until payment is received. You may find it helpful to set aside a morning or afternoon a week to dedicate to invoicing and credit control. Poor cashflow can have a significant effect on a sole trader’s business, so it’s important to keep on top of chasing late payments.


  1. Use a Business Bank Account

When you first start working as a sole trader it can be tempting to use your own personal bank account for your business income and expenditure. This can quickly get messy and makes it hard to keep an eye on your business finances. Set up a specific business bank account and use this for all business transactions. This will make it much easier to keep track of where you are and to see if your business if profitable.


  1. Get the Right Insurance

As a sole trader you need to ensure you have the right level of insurance to protect you and your business. Depending on your trade, you may require public liability insurance or professional indemnity insurance. If you employ staff you will need employers’ liability insurance. If you are unsure as to what type of insurance you might require, seek advice from an insurance professional.


  1. Be Aware of Your Health & Safety Responsibilities

If there is a likelihood of others being harmed as a consequence of your work activity, Health and Safety Law will apply to you. It is therefore important that you are aware of any potential risks and that you keep your health and safety policies up-to-date. Sole traders commonly affected include construction workers, plumbers, electricians, mechanics and anyone who employs staff. If you are registered with a professional body such as Gas Safe or CSCS, they may be able to provide you with useful resources. The government body responsible for Health & Safety, the Health and Safety Executive, also provides a wealth of information aimed at small businesses which may help you better understand your responsibilities and how the law can affect you. You can find this information here: https://www.hse.gov.uk/simple-health-safety/index.htm

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