Taxation Law For The Sole Trader

Taxation Law for the​ Sole Trader
They say the​ only things in​ life that are certain are death and taxes .​
For the​ sole trader,​ this is​ definitely the​ case,​ and at​ times it​ can seem like an​ overbearing pressure .​
Thankfully,​ for the​ sole trader there are many ways in​ which you​ can minimise liability to​ income tax and leave more in​ your bank account at​ the​ end of​ the​ month .​
in​ this article,​ we will look at​ some of​ the​ key features of​ tax management from the​ perspective of​ the​ sole trader,​ and some of​ the​ ways in​ which the​ sole trader can minimise the​ legal consequences of​ his operation.
As a​ sole trader,​ you​ are usually accountable for your profits in​ terms of​ income tax .​
This can be particularly problematic,​ given that the​ structure of​ income tax in​ most jurisdictions is​ a​ fairly heavy burden on​ the​ citizen,​ particularly those with higher incomes .​
the​ first thing that should be considered is​ incorporation .​
as​ a​ corporate entity,​ you​ will be required to​ handle more paperwork,​ but ultimately it​ will save you​ money .​
Corporation tax on​ profits is​ lower than income tax in​ the​ majority of​ situations,​ and dividend income carries less taxable weight than other income,​ for example wages and salaries .​
the​ first thing to​ do,​ as​ a​ sole trader within the​ top income tax bracket,​ is​ to​ incorporate,​ which could potentially save thousands every year.
The sole trader must be aware of​ the​ fact that there are certain items that cannot be discounted from income .​
in​ fact,​ certain everyday items must be declared and must give rise to​ tax .​
For example,​ say a​ self-employed solicitor is​ given a​ bottle of​ fine wine by a​ particular client every year as​ thanks for his service .​
This wine,​ although not initially apparent,​ will usually require declaration for tax,​ on​ the​ basis that it​ is​ an​ ongoing gift or​ benefit arising from employment .​
It is​ therefore important to​ watch what is​ included and what is​ ignored from your tax return .​
If you​ are at​ all unsure,​ it​ is​ better to​ include an​ item and pay tax,​ rather than running the​ risk of​ neglecting to​ mention its existence .​
Alternatively,​ it​ may be a​ good idea to​ consult a​ specialist on​ the​ particular laws of​ your jurisdiction,​ and to​ determine whether or​ not it​ would be possible to​ avoid liability .​

Another important thing to​ remember is​ that there may be certain personal capital gains liability for disposal of​ a​ primarily business asset .​
as​ a​ sole trader,​ this means you​ will be liable to​ account for the​ disposal of​ the​ asset and any capital gains at​ market value,​ which can be a​ costly business .​
Again,​ it​ is​ probably advisable to​ consult a​ tax lawyer or​ tax adviser to​ minimise liability on​ disposal and to​ manage your tax liability more effectively.
Tax law is​ a​ particularly intricate area of​ the​ law,​ and one that is​ in​ perpetual change .​
This means the​ small business owner is​ required to​ keep one eye on​ tax developments to​ avoid being caught out,​ which means there is​ less room for focus on​ the​ core areas of​ business and making money .​
Alternatively,​ the​ advice of​ a​ tax specialist can be invaluable in​ minimising overall liability and ultimately saving money from your tax bill every year.
Taxation Law For The Sole Trader Taxation Law For The Sole Trader Reviewed by Henda Yesti on July 03, 2018 Rating: 5

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