Accountant Chat-Tax as a sole trader 2020/21

Accountant Advice – Tax

As your accountant, the team at Digivolve can help set you up as a sole trader.

Alternatively we can seamlessly migrate you from an existing accountant.

We use software such as Xero and Quickbooks along with Receipt Bank to help make this as easy as possible.

Making tax digital is coming into force soon for sole traders from April 2023, at that point all records will need to be digitally processed.

Don’t forget to Contact us today to help you get this set up ahead of time.

We’ll get you set up with Xero or Quickbooks and have everything running smoothly for you, allowing you to concentrate on your own business.

How does it work?

A sole trader is the simplest form of being self employed, this comes with the minimum requirement of submitting a personal tax return once a year.

Simply put we take your income less any business expenses, to arrive at a profit number, this is then taxed at the following rates:

0 – 12,500 – 0% Tax*

12,501 – 50,000 – 20% Tax

50,001 – 150,000 – 40% Tax

150,001 + – 45% Tax

*Note that your personal allowance of £12,500 can get taken away by £1 for ever £2 you go over £100,000. So this can sometimes equate to a higher than expected tax charge.

Worked example:

Joe earns £60,000 a year on invoices sent to customers, he has business expenses of £10,000 and therefore has a profit of £50,000.

The tax on this would therefore be:

0 – 12,500 – £0

12,501 – 50,000 – £7,500

There is then national insurance to consider which can be found on our other blog post – Here

For instance, the main thing that catches people out being self employed is the 50% payment on account. This is written about in our other blog post here – (To be written)

HMRC’s tax rates can be read – Here

To find out more about – Xero

To find our more about – Quickbooks

For us to help you understand your taxes please Contact us

Accountant Haywards Heath, Burgess Hill, Forest Row, East Grinstead Xero and Quickbooks

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