The questions below relate to the Sole Trader Premium Payroll service only.
Q. I have already registered as self-employed but it is half way through the year, can I still come and work through your Sole Trader Premium service?
Yes, you will need to provide us with details of your income and expenses to date. You will become eligible for a Self Assessment tax return at no cost when you have used Sole Trader Premium for a minimum of 6 months. After 9 months you will also become eligible for a set of annual accounts. If you have not met these criteria, for an additional fee, a Self Assessment and set of accounts can still be produced.
Q. What do I need to earn to become a Sole Trader Premium customer?
Your turnover will need to be above £50,000 per year to benefit from the Sole Trader Premium service. If your income is below £50,000, our standard Sole Trader Payroll service product will bring you the best benefits.
Q. What are your fees?
Fees for our Sole Trader Premium Payroll solution are 6% of the invoice total and will therefore vary depending on the invoice total. To benefit from all the services offered within the Premium service a minimum number of payments must be made. Please see Sole Trader Premium terms and conditions for further information.
Q. What is IR35?
IR35 is the government’s process to determine your employment status. In short it is in place to determine whether you are a genuine contractor; or whether you should be employed and are avoiding paying PAYE on your full earnings. As a Sole Trader Premium customer we can arrange an assessment of your contract terms if you would like to undertake one. For more information, visit http://www.hmrc.gov.uk/ir35/
Q. What accounts and records do I have to keep as a sole trader?
You will need to keep track of your incomings and outgoings to ensure you pay the correct amount of tax. We will provide you with a monthly expense template with which to do this. HMRC requires that you keep copies of any receipts for 7 years. We will text you each month to remind you to send your completed expense form to us. This will enable us to complete your annual Self Assessment tax return and produce a set of annual accounts for you.
Q. Do I need insurance?
In all likelihood the companies you contract with will require you to have insurance. As a Sole Trader Premium contractor you will be covered by:
- Professional Indemnity Insurance for each week you work. This is financial security in the case that a claim is made against the work you have carried out.
- Employers and Public Liability Insurance for each week you work. This protects you against claims for damage or injury to people or property.
Other more specific industry insurances are available and can be quoted for through our insurance partners, alternatively you can arrange your own cover elsewhere.
Q. How do I know how much VAT and Income Tax I have to pay?
We will notify you of the amount of tax and VAT you have to pay or reserve on a quarterly basis – as long as we receive your regular monthly expenses and all related financial information from you in adequate timescales. Without an update on your expenses and additional income, we will not be able to provide this information for you, or an end of year Self Assessment tax return.
Q. Do I have to register for VAT as a sole trader?
If you earn (or expect to earn) over £83,000 per annum, then you will need to be registered for VAT and charge VAT on your invoices. If you earn under £73,000 per annum there may be benefits to registering voluntarily for VAT. Please speak to us for further information.
Q. How do I register for VAT?
We will do this for you and complete all of your subsequent VAT returns. We will also advise if any of HMRC’s VAT schemes could be beneficial to you.
Q. How often do I have to make VAT payments and at what rate?
This is dependent on which VAT scheme you join and payment frequency could vary from monthly to quarterly payments. We will advise you of how much VAT you need to pay and the different payment options available to you.
Q. What is the VAT Annual Accounting Scheme?
This scheme allows you to make 10 monthly or 3 quarterly payments of the same amount towards your VAT liability for the year. You then make one final payment for the balance due. The scheme makes it much easier for you to manage your company’s cash flow.
Q. What is the VAT Flat Rate Scheme (FRS)?
HMRC introduced the FRS to simplify VAT returns for small businesses. You will charge the full VAT rate (20%) on your invoices to clients, but will pay a significantly lower percentage to HMRC to account for the VAT reclaimable on purchases. The percentage paid to HMRC will depend on your main business activities.
Important facts about the FRS:
- The highest flat rate percentage is 14.5%, the lowest is 4%. Your allocated rate can be anywhere on the scale between these two amounts, depending on your business activity.
- In the first year of VAT registration you can receive a further 1% reduction on your flat rated amount (therefore making the highest and lowest flat rate amounts 13.5% and 3% respectively).
- If your turnover is anticipated to be higher than £150,000 in your first year, or reaches over £230,000 (VAT inclusive) at any point, then you must exit the scheme.
- Members of the FRS are unable to claim back the VAT on any purchases that value under £2000.
If you have any further questions, please contact us and we will be pleased to help you.