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Do sole traders need to hire an accountant?

If you are a sole trader, you have to decide whether you should hire an accountant or not. Here, we give you the information you need to understand why taking on an accountant makes sense for most sole traders.

As a sole trader, you need to understand your obligations when it comes to keeping accounts. Knowing what you need to do is the first step to determining if you have the time and skills to keep your own accounts, or if you should hire an accountant.

Here is an overview of what you will need to do to keep accurate accounts and benefit from doing so:

Registering with the tax authorities

When you start working for yourself, you have to register with the tax authorities. You need to determine which company format is right for you and register accordingly. Choosing the right format and registering properly are both important, and making the wrong decision at this stage has implications for you later.

An accountant can help you with this decision and ensure you register properly with the tax authorities.

Maintain accurate accounts

As soon as you start work, you need to keep an organised list of how much you earn and how much you spend. The best way to do this is to keep these details up to date on a daily basis using accounts software, which you would need to buy and learn how to use.

You also have to make sure that you back up your accounts, and keep evidence of each transaction. By law, those records have to be kept for several years, so the tax authorities can check it if they want to.

File an accurate tax return

Every year, you need to file an accurate tax return and do so on time.

Register for VAT and Corporation Tax

Once your turnover reaches a certain point, you need to start charging VAT. Firms then need to keep VAT accounts and pass on the tax collected to the government, in full and on time.

The same applies to corporation tax. Failure to handle these taxes properly will normally result in an audit and, potentially, fines or prosecution.

Analyse your accounts on a regular basis

Your accounts are not just there to satisfy the tax authorities. Keeping accurate accounts can benefit you greatly, but only if you understand how to look at the data. An experienced and qualified accountant will know how to generate profit and loss reports, which you can use to better manage your business and make greater profits.

Posted by Peter
June 8, 2015
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