10 Tips for Sole Traders

Here are some top tips to keep your business running smoothly with our sole trader insurance.


1. Setting up as a sole trader

Setting up as a sole trader is a pretty straightforward business, you can really get up and running quite quickly. And the sooner you actually start doing business, the sooner you can earn some money, as any profit is yours.

2. Keep a diary

As it is you and solely you running your business and there are numerous day to day tasks that can make some huge demands on your time. Making sure you manage your time will be crucial to ensure you can efficiently tackle every necessary task. Learn to plan your time wisely by using a time management diary; break your day down hour by hour.

3. Pay taxes on time

As a sole trader you are legally responsible for completing your tax returns every year though a self assessment tax return as well as registering for VAT if your turnover exceeds the VAT threshold of £73,000. Remember, you have to keep records of your business income and expenses. You don't want to get into trouble with the taxman.

4. Invoice immediately

As soon as you have completed the work you were hired for, send your invoice out immediately; preferably by email so it can't get 'lost in the post'. Make sure your invoice has all the relevant information such as total cost, payment terms and bank account details for the payment to be made to.

5. Set up a business bank account

As a sole trader, just because all the money you earn is yours, doesn't mean you should spend every penny of it. Remember you are still a business. You should set up a business bank account to get your business earnings paid into; then transfer your wages into your own personal account. That will help you to manage your money more effectively, and ensure you aren't tempted to spend it all.

6. Save, save, save

As a sole trader it's your responsibility to raise any money needed for your business, from your own assets or from loans. With most small businesses struggling to even secure a loan it makes more sense to save the money you do make - in case you need to invest it in new equipment, reinvest it into your business or to pay your tax bill.

7. Can sole traders have employees?

Contrary to popular belief, yes you can actually employ people as a sole trader business. If you find that you can't do all the work yourself you can hire additional staff and delegate, though you will have to notify HM Revenue & Customs (HMRC) and collect income tax and national insurance contributions from your employees as well as run a Pay As You Earn (PAYE) payroll scheme.

8. Get sole trader insurance

Getting a good sole trader insurance policy should be a top priority. Protecting yourself against the risks you can face as a business owner. Dependant on your business needs you may need public liability or professional indemnity insurance. And if you employ staff you are required by law to have employers' liability insurance.

9. Consider incorporation

Remember just because you start your business as a sole trader doesn't mean you have to trade as one for the rest of your life, you can change you business' legal status, as your circumstances change. In some cases incorporation can reduce the amount of income tax you pay on your business profits as well as make you a separate legal entity from that of your business. Speak to a business adviser or accountant to find out the implications for your business.

10. Get a company website

Think of your website as being your greatest promotional tool. Your company website will communicate to the world all your business capabilities, besides if you aren't on the internet in these times you virtually do not exist.

About the author

Mike Stephens FCII is a respected senior industry professional and Fellow of the Chartered Insurance Institute (CII) with well over 40 years’ varied experience in the commercial insurance sector as a director, underwriter, and operational improvement manager.