One of the biggest advantages of running your business as a sole trader is how simple it is to start and run. A limited company, and its directors, have more legal responsibilities and duties than someone who is operating their business as a sole trader.
You have less admin as a sole trader and it's easier to change business structure if you need too.
However, you will pay more tax than a LTD company.
You can register as a sole trader if any of the following information relates to you;
You earned more than £1,000 from self-employment in a tax year; 6th April – 5th April the following year.
You need to prove you’re self-employed, for example to claim Tax-Free Childcare.
You want to make voluntary Class 2 National Insurance payments to help you qualify for benefits and/or government pension.
If you qualify for self employment then you can register on the GOV website.
You will be registering for a self assessment. By registering for a self assessment you are telling HMRC that you are self employed.
There is no congratulatory letter or email once you register. Just a confirmation email to say you now need to submit a self assessment each year.
When you register, HM Revenue and Customs (HMRC) will:
Send you a letter with your 10-digit Unique Taxpayer Reference (UTR)
Set up your account for the Self Assessment online service
Then in 10-21 days you will be sent an activation code for your online account.
KEEP YOUR UTR AND ACTIVATION CODE SAFE! You will need them when you register to complete your first tax return.
DO NOT give this information out to any company or peer, they are unique to you and public knowledge of this can lead to scam or fraud situations.
HMRC suggests that you should register with them as soon as you become self-employed. This means you will be responsible for your own business and are able to keep all business profits after tax. You are personally responsible for any losses your business makes.
The self assessment tax year is the 6th April -5th April every year.
You need to register for a self assessment (otherwise known as registering as a self employed/ sole trader) by the October after your first tax year ends.
So, if you starting earning more than £1000 of non-tax cash between Jan-April then you need to register for a self assessment by October of that year and pay your tax by January of the year after.
If you start earning more than £1000 of non-tax cash between April and December then you need to register for for self assessment by the October of the year after and pay your tax bill by the January of the year after that.
EXAMPLES:
You start earning more than £1000 in Jan 2022
Your first tax year will end 5th April 2022
You will need to register for a self assessment by 5th October 2022
You will need to pay your tax bill by the 31st Jan 2023.
OR
You start earning more than £1000 in May 2022
Your first tax year will end 5th April 2023
You will need to register for a self assessment by 5th October 2023
You will need to pay your tax bill by the 31st Jan 2024.
Business Name
Your business name can simply be your name or another one of your choosing.
You don’t need to register your business name however, if you want to stop someone using your name you can trademark it with HMRC.
There is also a few rules which need to be abides by when choosing your business name;
You must put your business name and your own name on all important documents such as invoices,letters etc.
You are not allowed to include ‘limited’, ‘Ltd’, ‘limited liability partnership’, ‘LLP’, ‘public limited company’ or ‘plc’.
It cannot be offensive.
It can’t be the same as an existing trade mark.
Your name also cannot contain a ‘sensitive’ word or expression, or suggest a connection with government or local authorities, unless you get permission.
To use 'Vet' in your name you need to get permission for the RCVS.
To use ‘Accredited’ in your company’s name, you need permission from the Department for Business, Energy and Industrial Strategy (BEIS).
It’s not a requirement to have a separate bank account as a self employed locum but it’s an highly recommended option.
You may want to keep your business income and outgoings separate to personal so accounts are much easier to follow. You can get another personal account or business account.
You will need your HMRC document which is emailed to you to say you have registered for self assessment and 2 forms of ID.
You can register online or in store for a business bank account. This process can take up to 2 weeks for everything to be completed so be careful when you book in work to ensure you have a bank account ready for your invoice to be paid into.
You’ll need to keep records of:
All sales and income
All business expenses
VAT records if you’re registered for VAT
PAYE records if you employ people
Records about your personal income
Your grants, if you claimed through the Self-Employment Income Support Scheme
Why you keep records
You do not need to send your records in when you submit your tax return but you need to keep them so you can:
Work out your profit or loss for your tax return
Show them to HM Revenue and Customs (HMRC) if asked
you must make sure your records are accurate.
Keep proof
Types of proof include:
All receipts for goods and stock
Bank statements, chequebook stubs
Sales invoices, till rolls and bank slips
What you’re owed but have not received yet
What you’ve committed to spend but have not paid out yet, for example you’ve received an invoice but have not paid it yet
The value of stock and work in progress at the end of your accounting period
Your year end bank balances
How much you’ve invested in the business in the year
How much money you’ve taken out for your own use
You need to submit a self assessment annually and from what we now know in this guide, submit a self assessment means working out how much tax you owe that year...we are getting the hang of this!
Yet the first, second even third time submitting a self assessment can be nerve racking. So, having a registered HMRC approved accountant is super handy!
Not essential but handy!
MFL has several accountants within the group including Harris and Co and Strive X. Feel free to contact Nichola, Rachel or James via the link below!
Conclusion,
Opting for a sole trader structure when establishing your locum business presents a straightforward and flexible approach. The simplicity of registration and the absence of complex administrative requirements make it an attractive choice, especially for those just starting in the locum field.
While there may be some personal liability considerations, the ease of management and direct control over your business affairs are distinct advantages.
However, it's essential to carefully evaluate your specific circumstances and consult with professionals to determine the most suitable structure for your locum career. Whether as a sole trader or another business entity, the right choice can significantly impact your success and financial well-being in the veterinary industry.
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