Are Sole Traders Allowed to have Multiple Businesses?
In today's competitive economy, it’s difficult to make ends meet with just one job. This is why it's not uncommon for individuals to look for side hustles to reinvigorate their monthly income. Although it's beneficial to diversify your means of monthly revenue, it can be slightly confusing to navigate how to file taxes for multiple income streams.
Investing in Several Business Opportunities as a Sole Trader
Running several businesses seems to be more of a necessity instead of a trend. This is because moving up a career ladder takes much more now than before. Slower career progression means slower promotions to higher income brackets. Unless you want to keep working until you retire, it's unlikely you'll be financially independent any time soon.
The benefit of participating in several businesses simultaneously is an opportunity to target several markets at once. Although you won't receive the same scope of returns in owning one sizeable company, you do have the flexibility to avoid weak performing markets. Since you pick up and drop a business endeavour with ease, you don't have to think about long-term progress. Instead, your businesses' performance is equally beneficial without being too much of a hassle to manage.
Registering Multiple Businesses as a Sole Trader
If you're classified under the "sole trader" tax bracket, you have the freedom to do business in different industries. Although it's not as profitable as running an entire operation as a company owner, the flexibility of being a sole trader lets you follow a simple structure in listing your taxes. Unfortunately, this will be slightly complicated if you run several businesses.
If you have several sole trader businesses, you don't have to register multiple times for self-employment. Instead, Her Majesty's Revenue and Customs (HMRC) will require you to submit a single self-assessment tax return with divided sections pertaining to different businesses.
Understanding Implications of Having Several Businesses as a Sole Trader
Once you complete your self-assessment tax return, you'll also need to complete a 'self-employed income' under each business. This sets the amount of tax and National Insurance (NI) contribution you'll owe for all businesses' total amount of income.
Besides the computation of your regular tax payments and NI contribution, you're also limited on the Personal Allowances you can request. As a sole trader, you can only request for tax-free personal allowance once instead of one instance per business. Additionally, you can qualify for a trading allowance if you have an income that amounts up to £1,000 yearly. However, you don't have to pay tax for these forms of income if it doesn't reach the threshold.
Remember to register for VAT once your yearly turnover reaches beyond the VAT registration threshold. Since you have several businesses, you must compute the total income generated to account for your overall earnings. VAT registration will become mandatory to all your trades, as long as they contribute to your sources of income. This means each of your customers will need to pay VAT.
Without a doubt, nothing is disallowing you from running several businesses as a sole trader. However, you need to consider the implications above and incorporate them into your tax filing duties. Thankfully, you don't have to handle these matters yourself if you aren't great with numbers. You can look for professional tax preparation experts to create a simplified arrangement for your regular tax forms.
1to1 Accountants offers professional accountancy services for business and limited companies. We understand your needs as a sole trader by providing bespoke solutions for your financial situation. Schedule an online meeting with our financing experts today!