As a new sole trader, navigating the world of self-assessment can seem daunting. With so many rules and regulations to follow, it’s easy to feel overwhelmed and unsure of where to start. That’s why we’ve partnered with Sage to provide you with all the information you need to know to confidently submit your first self-assessment as a new sole trader.

First things first, let’s start with the basics. What exactly is self-assessment and why is it important for sole traders? Self-assessment is the process of reporting your income and expenses to HM Revenue and Customs (HMRC) through a tax return. As a sole trader, you are responsible for completing this tax return every year to declare your business profits and pay any taxes owed.

Now that we have a better understanding of self-assessment, let’s dive into what you need to know as a new sole trader. The first step is to register as self-employed with HMRC. You can do this online or by phone, and it’s important to do so by October 5th of your business’s second tax year. This will ensure that you are registered in time to submit your first tax return by the deadline of January 31st.

Once you have registered as self-employed, you will need to keep accurate records of your business income and expenses. This includes all sales, expenses, and any other business-related transactions. Keeping detailed records is crucial as it will make completing your tax return much easier and more accurate.

Now comes the part that many new sole traders dread – filling out the tax return. But fear not, with the right tools and knowledge, it can be a smooth and stress-free process. This is where Sage comes in. Their user-friendly software, Sage Business Cloud Accounting, can help you keep track of your business finances and generate reports that will make filling out your tax return a breeze.

When it comes to filling out your tax return, there are a few key things to keep in mind. Firstly, you will need to declare all of your business income, including any earnings from self-employment, rental income, and interest on savings. You will also need to declare any expenses related to your business, such as travel expenses, office supplies, and equipment purchases. These expenses can be deducted from your total income, resulting in a lower tax bill.

It’s important to note that as a sole trader, you are personally liable for any taxes owed on your business profits. This means that you will need to set aside money throughout the year to cover your tax bill. Sage Business Cloud Accounting can help you keep track of your income and expenses, making it easier to budget for your tax payments.

Another aspect of self-assessment that is often misunderstood is National Insurance contributions. As a sole trader, you will need to pay both Class 2 and Class 4 National Insurance contributions on your profits. Class 2 contributions are a fixed weekly amount, while Class 4 contributions are based on your profits. Again, keeping accurate records of your income and expenses will help you determine how much you owe in National Insurance contributions.

One of the biggest benefits of being a sole trader is that you can claim certain expenses as tax-deductible, reducing your overall tax bill. However, it’s important to note that these expenses must be solely for business purposes. This includes things like office rent, insurance, and professional fees. Sage Business Cloud Accounting can help you keep track of these expenses and generate reports that will make it easier to claim them on your tax return.

In addition to keeping track of your finances, Sage Business Cloud Accounting also offers support and guidance for completing your tax return. Their team of experts can answer any questions you may have and provide you with the resources you need to confidently submit your tax return.

In conclusion, self-assessment may seem intimidating at first, but with the right tools and knowledge, it can be a manageable and even beneficial process for sole traders. By partnering with Sage, we hope to provide you with the support and resources you need to successfully submit your first self-assessment as a new sole trader. Remember to register with HMRC, keep accurate records, and utilize the tools and support available to you. With these tips in mind, you’ll be on your way to a stress-free tax season and a successful business.