How to start as a Sole Trader Elelctrician (2024)

How to start up as a Sole Trader Electrician

Starting up as a sole trader electrician is an easy and fast process.
This is what you need to do:

• Open a dedicated business bank account
• Register as self-employed with HMRC
• Decide about VAT
• Get business insurance for sole traders.
• Register with Part P Governing Bodies and Competent Person Scheme providers

Optional:

• Open an account with a local electrical wholesaler - this can be very beneficial because they usually provide 30 days credit for the goods purchased. This means that even if you don`t have the money for capital investment you can still do the job, provided that the client pays you before the 30 days credit runs out.
• Register with organisations such as TrustMark, ECA (Electrical Contractors Association) and others to project a professional look to your clients
• Set up a website for yourself where you can list your services, references, client testimonials and other details such as contact details
• Get some professional business cards and make sure you have them at hand all the time
• Get a work van with your trade name and contact details on it. In today's competitive climate you must look professional in order to be taken seriously.

Bank account

Do not use your existing personal bank account! Instead, open a new dedicated business account under a trading name, which can be your own name or something made up e.g. John Smith Electrical Services.

Registering with HMRC

You must register as self-employed with HMRC within three months of starting trading. You can register online here, or call HMRC on 0300 200 3504, alternatively you can do so by post by filling in CWF1 form.
Sole traders also have to pay Class 2 NI contributions (currently 3.05 GBP per week: 2020/21 Tax Year).

VAT

If your business has an annual turnover of 85,000 GBP or more you must register for VAT. If your turnover is likely to be less than that, we recommend avoiding registration.

Insurance

Most sole traders will look at taking out Public Liability Insurance up to 5 million GBP.
If you are planning on employing people, Employers Liability Insurance is mandatory.
If you provide any type of professional service or advice to clients, you should also consider getting yourself professional indemnity insurance, which covers potential financial losses in case of a client's claim or suing you.

Part P Governing Bodies and Competent Person Scheme providers

Electricians who register with a competent person self-certification scheme will be able to self-certify compliance with the Building Regulations whenever they carry out 'notifiable' work. Persons who are not registered with a self-certification scheme - including DIYers - will need to notify or submit plans to a building control body, unless the work is non-notifiable.
In short, you will need to be registered with one of the scheme providers in order to be able to sign off your work.
The main ones are: NICEIC, ELECSA, NAPIT and ELECSA

Although there are some other ones as well, we do recommend selecting one of these three because of the general public's familiarity with their names.

Sole Trader or Limited Company

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

By definition a Sole Trader or sole proprietor is when a business is owned and controlled by one person who takes all the decisions, responsibility and profits they run. Most electricians start up as a Sole Traders, so called “one man bands”.

Advantages:

• Simplicity. Starting up as Sole Trader is easy and fast. You can even become a sole trader whilst working as an employee for someone else, so you can give it a go without risking your job.
• Less paperwork. Since there are no employees involved, there is no need to complete many of the forms and accounting information that limited companies need to produce.
• A simple annual tax return, which is exactly the same as for self-employed sub-contractors.
• No need to register a company, you can trade under your own name or you can make a trading name up.
• For annual turnover up to 85,000 GBP there is no need to register for VAT. For turnovers above you must register for VAT within 30 days, or risk paying a fine.

Disadvantages:

• You as the owner of the business are solely liable for any consequences of business failure or any other liability, like injuring a customer or a property damage, for example. You will have to have Public Liability Insurance to help you cover the costs of such liabilities.
• As a Sole Trader you would mostly work for the public in domestic properties, partly because small business owners can hardly get bigger public sector or corporate projects. If you manage to grow your business you can form a Limited Company and tender for these big jobs.
• Unlike with a Limited Company, if your business can`t pay its creditors, your personal assets will be sold to meet their demands.

Limited Company advantages and disadvantages

Starting up in business as a limited company is a more complex formation process, and the financial and administrative responsibilities of running a limited company are certainly greater than those of a sole trader.

However, pros of a limited company are that you will likely pay less tax, have no personal liability for any financial losses (assuming no fraud has taken place) and have a professional image which will give you access to better funding options as well as bigger jobs and projects.

The limited company arrangement is for bigger companies above the 81,000 GBP annual turnaround, VAT registered with many employees.

For start, we do recommend starting up as a sole trader which is a simpler solution at a lower cost, yet providing sufficient opportunities for developing your business.