Micro Traders are basically very small sole traders, there’s usually no need to track outstanding customers or suppliers accounts - so everything can be treated as cash accounting straight in or out of the bank account. The same sole trader tax regime applies, so you pay 20% basic rate personal income tax on your business profits (not what you take from the business), and you then add NI Class 4 at 9% on profits over £8,424 and a small amount of NI Class 2 for the privilege of being self employed. Your personal allowance of £11,850 will be deducted before you begin to pay any tax of course (all rates quoted 2018/19 tax year).
For sole traders it’s wise to remember that if your tax bill exceeds £1,000 HMRC will ask you to add half of that amount again as a ‘payment on account’ towards next years tax. This must be paid with your January tax bill and then another half will be requested in the coming July. The good news is if your profits next year are less then expected, then you will have paid too much on account and your tax payments will be reduced to compensate. Being a micro trader is very simple, involves the minimum of red tape and is a great way to get started in business. Micro Trader Setup includes: Evaluation of your chosen trading style for legislative and taxation compliance, help designing a tax efficient salary strategy, registration of your new business and you personally with HMRC for Self Assessment Income Tax. Plus we will introduce you to a local Business Bank who can setup your first trading bank account.