Feeling overlooked and unemployed? In a time of economic uncertainty and unemployment at an all-time high more and more people are looking into becoming sole-traders.
There are numerous benefits to being a sole-trader, which include:
- You are the business owner
- Quick and easy to start
- Very few legal regulations
- You get to keep all profits after tax
- You will be able to claim a deduction for mortgage interest, rates and light and heat, if you have an office at home.
- You can obtain capital allowances on a computer. An add back of allowances will apply if there is substantial private use.
There are also a number of additional financial perks to becoming a Sole-trader:
- You can withdraw cash from the business without tax effect.
- You can withdraw any amount of profits, but it is not classed as remuneration as you are not an employee.
- Paying a salary to a spouse or family members must be commercially justified to be allowable for tax purposes.
- You obtain tax relief for expenses that are incurred wholly and exclusively for the purposes of the trade.
- If you can identify a proportion of an expense that relates to business you can claim the same proportion against tax.
- An adjustment must be made for tax to add back the proportion of any expense that relates to “private use”.
- Most commonly private use will be in respect of your use of telephone or power, own consumption of goods, and motor running expenses.
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