Running more than one business is entirely possible as a sole trader. But with so much to consider, you might need a little help. We’ve put together this blog to discuss everything about running multiple businesses in the UK – from taxation to allowances
What is a Sole Trader?
Being a sole trader means you are self-employed and operate your firm. Since a sole trader’s company has no separate legal entity from its owner, the owner is often referred to as “the business.”
How to run multiple businesses
You can own more than one business as a sole trader. If more than one company is owned, it is important to take note of the following:
When submitting your tax returns, you must declare each business to HMRC.
When documenting your finances, you will need to have all of your records in order and kept separate, and it also needs to be evident to HMRC that the firms are different from one another
Each business must run on its own
For example:
- Each business needs its own bank account
- Each business needs its own insurance policy
- Separate records and finances for each business, and no moving funds across companies without a formal loan or comparable agreement.
Do I need to register each sole trader separately?
Having more than one sole trader business does not need re-registering for self-employment. If you do this, HMRC will assign you a new UTR number and require you to file separate tax returns for each company. Instead, you’ll file a single Self-Assessment tax return, with a section for each company.
What happens to my taxes, VAT, and NI?
There are Tax, Vat and National Insurance implications associated with running multiple businesses,
Tax &NI Implications
When filing your tax return using the self-assessment process, you must fill out a section for each company you own. Your total income is subject to taxation and national insurance contributions since you are a sole trader. Running multiple businesses may bring you more revenue; therefore, you will owe more tax and NI.
Need help with setting up your business? find out how we can help
Vat Implications
Businesses must register for value-added tax (VAT) if their annual revenue exceeds £85,000.
For sole traders with multiple enterprises, each business’s revenue is added to determine whether the VAT registration threshold is met.
Example 1 – No registration is needed
Business 1: A corner store
Sam owns two businesses
Business 2: A restaurant
For the year 2021/2022, each business revenue amounts to the following
Business 1 Business 2 Total Revenue
£42,570 + £22,630 = £65200
Sam does not have to register for VAT since his combined income does not exceed £85,000.
Example 2– Registration needed
Sam owns three businesses
Business 1: A corner store
Business 2: A restaurant
Business 3: A barbershop
For the year 2021/2022, each business revenue amounts to the following
Business 1 Business 2 Business 3
£42,570 + £22,630. + £28,824
Total Revenue: £94204
Sam must register for VAT since his combined income exceeds £85,000.
Account payment can rise
How much you owe on your payment on account depends on your total income. If you have a higher income from running more than one business, then so will the amount you have to pay towards your payment on account.
Personal Allowance
Sole traders are eligible for a personal tax-free allowance each year. For the year 2021/22, the amount is £12,570.
This allowance will be calculated based on the total income from your businesses if you own more than one.
Trading allowance
If you are self-employed and generate income through trade, you may be eligible for a trading allowance of up to £1,000 per year. Even if you own many companies, you can only claim this allowance once.
How do I manage books for multiple businesses?
When you have a sole trader business, keeping books can be straightforward. However, starting a second business means keeping your finances separate. This includes separate bank accounts, separate invoicing, and separate balance sheets. Even if customers frequently visit both businesses, the temptation to combine the finances should be avoided.
Pearl Accountants have partnered with QuickBooks to provide you with the best software in the market. If you are managing multiple businesses or just starting, we recommend using QuickBooks to manage your books and stay on top of your finances.
Conclusion
Running multiple businesses can be a great way of multiplying your income and increasing your wealth faster than other methods. However, before you make the jump, there are many things you will need to look at carefully to ensure that this transition is done without fail or risk, as discussed above.
Pearl accountants are a team of expert accountants that can assist you with company formations and ensure you comply with tax, NI and VAT obligations. Call us today if you have any questions or if you would like to find out how we can help you.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.
