Sole trader accounts – how to make the most of your finances
Sole traders are actually the most common type of business in the UK, so it’s surprising this area of self-employment doesn’t get more attention. Here are some of the key things to bear in mind when planning your sole trading business financials:
Ensure you pay taxes on time
Of course, this should be a given. But that doesn’t stop hundreds of sole traders each year from being late in filing their yearly tax returns.
It’s far easier to keep and update your records through the year, rather than waiting until the last minute to have to put your return together. (And, of course, if you find out your tax owed before the deadline, you have time to put the extra money aside.)
Invoice straight away
Make sure you invoice as soon as you’ve completed the work you were hired to do. Your detailed invoice should contain everything the company needs to pay you including the total charge, payment terms and your bank account details.
Unfortunately, payments can take some time to come through, so be sure to add a clear payment deadline to your invoice. Chase it up if it’s not met!
It’s often sensible to set up a business bank account
Sole traders can use their personal bank account for work, but it’s not necessarily a good idea. If you make a lot of smaller transactions in your business, it can get confusing keeping track of which payments (and costs) are personal and which are related to work.
The other bonus is that it can help you manage money better. By keeping your work deposits in a separate account, you’ll give yourself a better chance of not overspending the money that you need for paying taxes and expenses.
Make sure you save more than you need to
The other benefit of having a separate business account is that you can have a clear picture of how much money your business makes, giving you the chance to save a set portion of your income.
This isn’t just a matter of keeping money back for tax, you may have lean periods or come across investments that could help you grow that require capital. It’s much less stressful to know that you have money there if you need it.
Get in touch with our team today for more information on sole trader accounts and personal tax returns.
