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Hi, I'm Graham from Inca Chartered Accountants. We put together this video series titled "Tax
Tips for small businesses" to help you understand and save tax. One of the questions we get
asked most frequently is -- "What is the best structure for my business?" Am I going to
set up as a limited company, a sole trader or perhaps as something different entirely.
Well, in this video I'm going to talk about the benefits of the sole trader. It's the
most common form of business there is in the UK and it's really easy to get going. In fact,
it's as simple as picking up the telephone and speaking to Revenue & Customs. giving
them some details and that's it. You are up and running . If you don't like to talk to
them on the telephone you can login and do it over the internet instead. You don't even
have to set up a separate bank account.
It is a good idea though, We would like you to set up a bank account, but just keep the
two things separate, your business and your personal life and everything will run nice
and smoothly. Sole traders are a great situation for you
if, like many small business owners you can't stand paperwork and administration. It needs
less structure to operate. You are the business. The money in one account is your money, the
money in another account is your money. You can move it backwards and forwards when ever
you want. There is no issue associated with that. It's yours. Do with it as you wish.
From a tax point of view a sole trader is particularly advantageous when ever you are
in the set up stage. So perhaps you have just come out of employment. Set up your own business.
You've had to incur costs, expenses to get the thing going. Maybe you haven't got your
first customers or very few. So you are actually running at a loss. We can use those losses
to claw back taxes you have paid elsewhere. Now if you were paying tax at 40% or 50% that
can be a huge advantage and of course taking time to get going and having that extra cash
in your pocket can be a great benefit to you when you're running your business.
The Sole Trader is also very useful when profits are very small especially if they are less
than £7,500 a year because that is the amount you get to pay tax free anyway. So no tax
to pay on anything you make up to that level. And of course as it starts to grow don't worry
because if it looks like something else is more advantageous we can make a switch. A
switch perhaps to a limited company which I'll explain a bit more about in the second
video