Setting up as a sole trader in the UK fitness industry can be a straightforward process if you follow the right steps and meet your responsibilities. In this guide, we'll break down the key aspects, responsibilities, and timelines to help you start your fitness business as a sole trader.
What Does Being a Sole Trader Mean?
Being a sole trader means running your own business and being self-employed. You have full control over your work schedule and business operations. However, it also means taking complete financial responsibility for both the success and failures of your venture.
Is Being a Sole Trader Right for Me?
Sole trader status is the simplest form of business structure, making it easy to set up. The crucial point to remember is that you and your business are essentially one entity. You'll keep all the profits from your business after taxes but are also personally liable for any business-related debts.
Alternatively, you could choose to work for yourself by setting up a limited company. In this case, the business becomes a separate legal entity responsible for its assets and liabilities.
Naming Your Fitness Sole Trader Business
You have the option to choose a unique name for your fitness business or simply trade under your own name. Unlike limited companies, you are not required to register your business name. However, it's essential to include your name and your business name (if different) on all invoices and official documents.
Remember that your sole trader business name should not be offensive or include terms like 'limited,' 'Ltd,' 'limited liability partnership,' 'LLP,' 'public limited company,' or 'plc.' Additionally, it must not infringe on existing trademarks. If you wish to protect your business name from use by others, you can opt to register it as a trademark.
When to Set Up as a Sole Trader
In April 2017, the UK government introduced a tax-free trading allowance of £1,000 in a single tax year. Once your turnover exceeds this £1,000 threshold, you are required to register as a sole trader and inform HMRC about your income and taxes owed. This involves completing an annual self-assessment tax return.
You should inform HMRC and register for self-assessment by 5th October following the tax year in which your income exceeded the £1,000 allowance. The tax year runs from 6th April to 5th April.
For example, if you started your business in January 2023 and by 5th April 2023, your turnover was £10,000, you would need to register by 5th October 2023.
Responsibilities of a Sole Trader
While operating as a sole trader is relatively straightforward, there are responsibilities to bear in mind:
Annual Self-Assessment: You must complete a self-assessment tax return each year. The online deadline for this is 31st January following the end of the relevant tax year.
Record Keeping: Maintain accurate records of your business sales and expenses. These records are essential for tax purposes and financial management.
Income Tax: Pay income tax on your profits, which is calculated when you complete your self-assessment tax return.
National Insurance: Depending on your income, you may also need to pay Class 2 and 4 National Insurance contributions.
VAT Registration: If your turnover exceeds £85,000, you must register for VAT. Some businesses may choose to voluntarily register for VAT even before reaching this threshold, as it can offer certain benefits.
Setting up as a sole trader in the fitness industry can be a rewarding venture. By understanding the process and your responsibilities, you can confidently take the first steps toward running a successful fitness business.