Electrician, Sole Trader With A Small Business
What about paperwork and tax?
The paperwork involved with being a sole trader is virtually the same as for self-employed. There are only a few regular things to do. These are:
- Rising invoices when working for clients - you would normally do this after the job has been completed. We advise you to get a few invoices and receipt books printed of in order to make the process more professional.
- Keeping records of expenses - these are costs for everything that can be related to your business, such as vehicle running costs, premises, tools, insurance, materials, phone bills, etc.
- You will have to submit an annual self assessment tax return to HMRC.
As a sole trader, your business income is counted alongside any other personal income you have for tax purposes, so accounting is relatively straightforward. Your tax is calculated via the annual self-assessment process. You will have to pay income tax and National Insurance Contributions (NICs) on your profits. Any losses you make can be offset against your other income. When you fill in your annual self-assessment form, HMRC will calculate any Class 4 NICs you have to pay on your business profits.
It is vital to keep accurate and up-to-date financial records in order to make accounting an easy and fast process. You could do your own annual tax return or you can have an accountant do it on your behalf.
Finding work as a sole trader electrician
When starting your own electrical company, the first thing you will need to decide is whether to start up as a Sole Trader or as a Limited Company.
Sole trader: advantages and disadvantages
As a sole trader electrician, your biggest challenge is finding enough work to get by. That is why most electricians start up as sole traders while they are still in employment. By doing your own work in your spare time you can build up a client base to count on when you decide to quit your day job.
One of the best ways of getting a steady stream of electrical work is by teaming up with a few builders who constantly need electricians to do the electrical work. Plumbers can help as well and you can all recommend each other to clients.
You will have to familiarise yourself with marketing and advertising in order to have a steady stream of work available to you. Make sure to have a look at our guide on marketing for electricians.
The best possible marketing but not easy to achieve is by word of mouth. If you consistently deliver good jobs and satisfy clients, then people will gradually get to know about you and will call you without any other marketing tool involved.
Starting up a small business as an electrician is a great way to maximise your earning potential and be your own boss at the same time. It has many advantages and a few disadvantages.
Here they are:
- Earning potential. From now on you will set the rates of pay for yourself. You will decide how much to charge a client for a certain job. Of course you will face competition so your rates will have to be competitive, but you can expect to earn far more than an employed or a self-employed sub-contractor, and your earnings are uncapped.
- Being one's own boss is for creative and responsible people who are not afraid of hard work and taking risks, since starting up a small business can be extremely hard. You will have to devote all your time for years to come until the company is built up and you can afford to have people working for you. This will mean endless non-electrical work, such as looking for jobs, marketing, giving quotations, getting materials, doing paper work such as invoicing, and off course the worst one - chasing clients to pay up.
- An enormous advantage is that you can set your own hours, you decide on what schedule is most efficient. However, in the first few years you will most certainly not have enough time for your family.
- If your small business takes off to a good start you can build it up to a decent level within a few years and afford to hire employees to work for you. This may make your earning potential grow exponentially if they are productive enough. Of course it isn't easy to find good workers, and even if you do it is always you and your management skills that your business depends on.