Are you an individual trader and want to expand? Hiring people to help you run the business is the logical next step in ensuring future growth. Many people wonder how this affects their sole proprietorship. So are you allowed to work as a sole trader or do you have to start a business?
The good news is that you can hire employees and remain sole proprietorships. You don’t have to create a GmbH if you don’t want to. Although sole proprietorships run the business on their own, that doesn’t mean they have to work alone. The term sole proprietorship simply means that you are acting as yourself under your own name.
You can choose whether to hire permanent, part-time, or freelance employees, whichever suits you best. So now you know that you can hire employees and maintain your sole proprietorship status. Time to make sure everything is set up correctly.
Earning two incomes is something many people do to increase the amount of money they make each month. This is permitted as long as you have registered as a freelancer with HMRC.
You do not need to notify HMRC of your additional employment besides your sole proprietorship as they will know of your regular employment as soon as your employer registers you. However, that does not mean that there are no tax implications for having two jobs at the same time. If you are a sole trader you will need to complete an annual tax return, and if you have a regular job alongside your sole proprietorship, your income from both activities must be taken into account.
If you are self-employed and employed at the same time, your social security contributions will be affected. Being employed means you pay National Insurance Class 1 contribution, while if you pay in more than £ 6,365 a year you pay National Insurance Class 2 contributions instead, and if you earn more than £ 8,632 a year you pay Social Security contributions Class 4. You may also get a second tax number, but this usually only applies to owners of a GmbH.
For those who previously only accounted for themselves, it’s a bit of a shock to suddenly consider someone else in their tax affairs. It can be a big learning curve, but we are here to help.
From now on, you have to worry about payroll, employer social security, and employee benefits like vacation, maternity, and sick leave benefits.
The first thing to do is register with HMRC as an employer and set up for PAYE. This allows you to deduct income tax and social security from eligible employees’ wages and pass them on to HMRC on your behalf.
It’s best to do this ASAP so nothing is forgotten or neglected as you prepare to train a new hire! Learn more about our affordable online accounting. You will have your own dedicated accountant who will work closely with you.