Running your own business as a self-employed trades person, be it electrician, plumber, plasterer or whatever, you have little or no time for anything else other than keeping your customers happy. Operating as a sole trader does make your responsibilities simpler and less time consuming,  but you are exposed personally to suppliers who could take action against you if your business hits hard times.

Deciding on whether it is in your best interest to operate as a sole trader or limited company depends on a variety of factors including your exposure to creditors in the event of insolvency.  It is highly advisable to seek professional advice on this matter as there may be factors you are unaware of that may benefit or harm you in the future depending on how you operate your business.

Do I have to pay income tax if I make a loss in any one year?

Income tax is based on what you receive from your business, not what the business makes or loses. Therefore, however much you have received from your business will depend on how much income tax you are due to pay. If the business has suffered losses, but the amount you received from it has not altered, your income tax liability will not alter. If on the other hand you have consequently received less money from your business, this will have an effect on the amount of income tax you pay.

Do I qualify for any assistance if my income drops below a certain threshold?

You can qualify for working tax credit depending on how much you receive from your business. This will take into account any other benefits that you or your partner may already receive such as child benefit and family tax credit.

I want to change from operating as a sole trader to a limited company - can I transfer all outstanding invoices to the new company?

Any legally binding agreements including invoices that have been served in your name as a sole trader will remain liable to you personally. You can ask a supplier if they are okay with outstanding invoices being changed to the company name and if agreed no problem. However, they are likely to become concerned that you may be unable to pay for your outgoings and may suspect you doing this to protect yourself from creditors. Otherwise, requesting future invoices to be in your company name should not be a problem with any supplier, although some may require a personal guarantee.

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