Being self-employed is something that many of us strive for, and if you run your own business as an individual and work for yourself, you are known as a ‘Sole Trader’.

Being a sole trader comes with a whole host of advantages. You can set your own working hours, develop a healthy work/life balance and be around for those times that you might miss working a standard 9-5.

As a sole trader, you can keep all your business’s profits after tax. That being said, you’re also personally responsible for any losses your business makes and making sure you pay income tax and national insurance correctly.

When setting up as a sole trader, it’s important to know exactly how much tax you should be paying. It is also important to complete an annual self assessment tax return. Registering for self assessment is easy to do and very important each tax year. When operating as a sole trader, you are personally liable for any national insurance contributions.

Recent research has shown that over 75% of sole traders are unsure of tax and VAT thresholds.

That’s right – as many as 75% of UK sole traders are unsure of the current tax thresholds that apply to them. Above all, it could be costing them too.

The survey of 800 sole traders showed that there are several gaps in the financial knowledge of small businesses in the UK. At Gorilla, we’re here to fill those gaps for you, so you can focus on running your business.

  • 3 in 4 sole traders are unsure of the amount they would need to earn to pay a higher tax rate of 40% (£50,271)
  • Less than 1 in 10 (9%) know what could happen if they didn’t pay their tax bill
  • 1 in 50 thought nothing would happen if they did not pay their tax bill

Which sole traders are the least informed?

According to the survey, lawyers are most likely to know when they need to pay a higher income tax rate, whereas retailers are the least likely, with only 13% knowing the correct answer.

Only 31% of sole traders knew when they needed to submit a self-assessment tax form, again with law professionals being the best informed, with 42% of them knowing the 31st January date.

Unlike limited liability companies, sole traders are not required to pay corporation tax, however 73% of sole traders believe that they need to pay this tax.

Sole traders pay most tax since records began

More and more people are setting up their own businesses and becoming self-employed full-time. There has been a significant rise over the last 20 years, and sole traders are now paying the most tax since records began.

In January 2023, the self-employed paid £22bn in income tax, which is one-third higher than last year. This is a record high.

Looking after your finances

According to the same survey, 18% of sole traders do not pay into any form of pension scheme or have savings for later on in life. Those least likely were based in the East of England, with only 55% of traders there having a pension scheme. In London and Wales, sole traders are most savvy with 92% having a pension pot.

21% of sole traders also said they did not have a 3 month safety net saved, which is incredibly worrying in an economic crisis. Although the most savvy when it comes to pensions, those in Wales were the worst at saving, with 1 in 3 not having that money put away.

Restaurants were most likely to put at least 20% of their income back into their business, but those in education were the least likely, with 1 in 4 not reinvesting.

At Gorilla Accounting, we provide a comprehensive accounting service for small businesses just like yours. We know that every one’s circumstances are different, which is why our dedicated accountants take a personalised approach to your accounts and help you put money aside for when you need it most.

We get to know you and your business on a personal level, so we know the ins and outs of your finances and can help with any area you need us for.

Appointing Gorilla Accounting will take away some of the pressure, giving you the work/life balance needed to run your business successfully with the peace of mind that your finances are taken care of.

Partnering with Mettle

Here at Gorilla Accounting, we have partnered with Mettle. Mettle is a free business account by NatWest that helps small businesses start, run and grow.

The accounts are built for small businesses, start-ups, limited companies and sole traders. Customers can apply for an account in minutes and connect to accounting software to help keep track of their books. Just like us, Mettle works alongside FreeAgent, which means customers can seamlessly sync all their business transactions. FreeAgent is an industry-leading accounting software which is available for FREE for all Gorilla customers.

A Mettle account comes with a UK account number and sort code and an in-app chat feature so that customers can speak to real people when they need help.

Mettle are currently offering £50 to anyone who opens a new account with them, so it’s a great time to join.

If you need a business account and you’re ready to use Mettle, click here to apply today or learn more about business accounts here.

Joining Gorilla Accounting

If you’re looking for a forward-thinking, tech-savvy accountant, switching to Gorilla is so easy. We have vast experience working with businesses in a diverse range of industries and sectors. From tech start-ups to established SMEs, contractors, freelancers and locums – we’re able to support a wide range of small businesses and SMEs.

Our pricing is transparent with no hidden fees or surprises. Our sole trader accountancy package is just £50 + VAT per month.

Ready to join Gorilla? Fill in our online form here.