Sole trader and childcare

[MrsR87]

Hello all

Apologies if this is obvious to some but I am struggling to find a definitive answer.

After many many years of being employed l am now a sole trader. My business was set up in January 2024. In relation to qualifying, the government website says you must earn £2380 over a three month period or £183 per week. Luckily, I am still in the one year grace period in relation to childcare but I am looking to the future.

Is the £183 considered from the “drawings” I make from the business for personal use. For example, I decide to pay myself £250 a week into my personal account. Or does it count from the money that goes into my business account, which of course some months is higher and others lower. Also, do you need to evidence this when claiming the free hours?

Anyone got any experience with this? Or advice?

Thanks

do you have a good tax accountant set up?

Are you definitely a sole trader or are you using it a catch-all for self employed?

If you're a sole trader then there is no 'business' and you as separate entities. Doesn't matter if you have two different bank accounts, it's all just you. So all your earnings are yours for the purpose of the threshold.

If you have small ltd company which you own and are employed by, then you need to make sure you pay yourself enough in dividends or salary to meet the threshold.

If you're a sole trader, then it doesn't matter how you're paying yourself - it's the income your business makes.

If you have a limited company, then you'd need to be paying yourself enough each month.

They check this using your tax information, and requesting payslips and bank statements in addition if needed. You'll need to reconfirm every three months and state that you are meeting the requirements.

If it's a seasonal business, there are some ways around the monthly requirement, but you still have to be exceeding the annual one, and it does make life more complicated.

Thank you.

Yes. Definitely a sole trader. Yes, you’re write - im just a single entity with the business aren’t I! I’m guessing the £183 a week is counted on profits (so what’s left once I’ve paid room hire/ equipment costs) rather than total earnings?

thanks

Yes, that's right - profits.

When you complete your self-assessment tax return you'll list your takings and your expenses and your profit is calculated from that.

Your profit is considered your personal income for the year - so used for the purposes of your income tax bill, your lendability for mortgages and any benefits e.g childcare.

It's the income (all money you make) minus the expenses incurred to do so

Thanks all! That’s much clearer to me now🥰