Sole Traders and VAT

(2 minutes to read)

As a sole trader, you may need to register for VAT – this page discusses when and how you go about this.

What is a sole trader?

A sole trader is a type of self-employment whereby you run your own business as an individual, keeping all of your profits after tax.

It also means that you will be personally liable for any losses incurred, unlike a limited company contractor for example, where you would be seen as a completely separate entity to your business.

What are a sole trader’s responsibilities?

As a sole trader, your general responsibilities will include:

  • Keeping business records and proof of expenses throughout the tax year.
  • Filing an annual self-assessment – your tax return needs to be filed and paid by the 31st of January each year.
  • Paying Class 2 and Class 4 National Insurance (paid via your self-assessment tax return).
  • Registering for VAT – should this apply to your businesses.

For more information on starting up as a sole trader, read our How to set up as a Sole Trader page.

Do all sole traders need to register for VAT?

No, not all sole traders have to register for VAT, but it is compulsory if the following applies to you:

  • Your total VAT taxable turnover for the last 12 months was over £85,000.
  • You expect your turnover to exceed £85,000 in the next 30 days.
  • You or your business is based outside of the UK (regardless of your annual turnover).

It is also possible to register for VAT voluntarily – many choose this option as it does have its benefits, such as:

  • Being able to reclaim VAT on goods and services purchased for business reasons, where you have been charged UK VAT.
  • It lends credibility to your business – your clients and customers can potentially reclaim the VAT you have charged them on invoices.
  • It can give you access to a wider range of suppliers and clients due to the fact that most will only deal with VAT registered companies.

How do I register for VAT?

The easiest way to register for VAT is by creating an online account.

You’ll then get a 9-digit VAT number (that you’ll need to include on all your raised invoices), information about when to submit your first VAT return and payment, as well as a confirmation of your registration date (known as your ‘effective date of registration’).

As a VAT registered business, some of your responsibilities will include:

  • Adding VAT to the price of all goods and services at the correct rate (currently 20%).
  • Keeping records of how much VAT you pay for things you buy for your business.
  • Sending a VAT return to HMRC each quarter – this should include the amount of VAT you charged your customers and the amount of VAT you paid to other businesses.
  • Paying any VAT you owe to HMRC.

We hope this page has answered some of your VAT questions. Our team of experts are available to answer any queries you may have, so drop us a line on 01442 795 100 or email Sophie at sophie.lewis@dolanaccountancy.com.

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Why Dolan Accountancy?

Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £105 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of Contractor Umbrella – With changes in Public Sector IR35 Legislation we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.
  • Same day payments- We offer same day payments as standard providing funds are received into our account by 9am, for no additional fee.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

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