Yes, A Sole Trader Can Have Two Businesses

There is no restriction on the number of businesses a sole trader can have.  In fact it is pretty common for entrepreneurs, sole traders or the self employed to have one of more business interests.  However there are some tax, national insurance and VAT implications you should be aware of if you are a sole trader with two or more businesses.

Let’s look at an example to explain the tax implications for a sole trader with two businesses.

Kevin has been a sole trader for many years, working as a self employed plumber. Kevin has now decided he would like to start a new business as a sole trader, offering web design services.

Tax and National Insurance for Multiple Sole Trader Businesses

Kevin is already registered with HMRC for self assessment as he has been a self employed plumber for many years, therefore he does not need to register as a sole trader again with HMRC otherwise confusion may set in and HMRC will issue another UTR number and expect two tax returns!

Kevin will pay tax and national insurance on his income earned from both businesses combined – there is no additional personal allowance available for the new business and if the new business makes a profit then additional class 2 and class 4 national insurance will be payable on these new profits.

It is also worth noting that his payment on account will also be based on his total income, which include his earnings from both his businesses.

Sole Trader Tax: How Much Tax Must You Pay?

Completing Self Assessment Tax Return for Sole Trader with Multiple Businesses

Kevin will need to submit two self employment sections one for each of his businesses as part of his Self Assessment Tax Returns and this is notification to HMRC that he is running multiple businesses.

If one business makes a loss, perhaps because Kevin is in the first year of trade in his new web design business, then the following options are available to him in respect of using this loss:

  • Set the loss off against the profits of his plumbing work;
  • Carry forward the loss to set against future self employment profits from either the plumbing or web design business;
  • Carry back the loss to set against the previous years profits made in Kevins existing plumbing business.

Next: VAT Implications for a Sole Trader with Multiple Businesses

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Anita is a Chartered Accountant with over 10 years experience in accounting, tax and operations for Small Businesses. She is experienced across a diverse spectrum of businesses meaning the advice she provides is practical as well as technical.