A New Year means a lot of things to a lot of people – and for many millions of people around the UK, it certainly means a requirement to file their self-assessment tax returns before the first month of 2023 is over. 

It is therefore timely that new figures have just been released, showing that many of the UK’s sole traders have serious gaps in their knowledge of their tax obligations. 

It comes on the backdrop of HM Revenue and Customs (HMRC) revealing nearly 5.7 million individuals were yet to file their self-assessment tax return for 2021-22, with less than a month to go until the 31st January 2023 deadline. 

What insights do the new figures offer into sole traders’ tax knowledge? 

The research into what UK sole traders knew about the tax they were required to pay was carried out by a card payments provider, and subsequently reported on by the LondonlovesBusiness website. 

The results will make for intriguing reading for many of those who have previously turned to TS Partners for sole trader accountancy support in Wellington, Plymouth or Newton Abbot, as well as those who are considering doing so. 

It was discovered through the survey, for example, that three-quarters (75%) of the country’s sole traders were unsure as to which tax thresholds presently applied to them. Furthermore, fewer than one in 10 (9%) of the 800 sole traders quizzed knew what could happen if they failed to pay their tax bill, with one in 50 respondents believing nothing would happen at all. 

Tax awareness varies considerably from one sector to the next 

The research involved the participating sole traders being asked various questions about their tax and savings habits, as well as questions designed to test what they knew about common VAT and tax principles applicable to businesses in the UK. Respondents were also asked which UK region they were based in, as well as which industry they operated in. 

These questions shed considerable light on what sole traders did and didn’t know about UK tax matters. When, for example, the respondents were asked what the threshold was for sole traders to pay the Higher Income tax rate of 40% (£50,271), lawyers were likeliest to know the answer, as the correct response was given by 53% of them. Retailers, meanwhile, were the least likely to know the correct answer, this being the case for a mere 13% of them. 

It was also alarming that overall, a mere three in 10 (3%) sole traders knew they needed to submit their self-assessment tax form by 31st January. Again, looking across the sectors, real estate agents performed especially badly on this score, with fewer than a quarter (23%) answering the question correctly. The best-informed group as far as this question was concerned were law professionals, although even in their case, only 42% provided the correct answer. 

One form of tax that sole traders do not need to pay is Corporation Tax; in this respect, they differ from limited liability companies. However, a remarkable 73% of the sole traders polled were not aware of this and believed they were required to pay this tax. 

Turn to accountancy and tax specialists that you can trust in 2023 

At this time when businesses and businesspeople of all kinds are under perhaps greater pressure than ever, it could hardly be more important to ensure you are on top of your responsibilities in relation to accounting, tax, and payroll. Making the right decisions now will greatly help you to achieve the results you aspire to in business throughout 2023 and into future years.

For more information about TS Partners’ sole trader accountancy support in Wellington, Newton Abbot, and Plymouth, or to learn more about any other aspect of what we do, please don’t wait any longer to enquire to us by phone or email.