Freelance Tax

  • Tax Returns: It’s Not Just About Your Expenses

    Rosie Slosek, who runs One Man Band Accounting, has kindly contributed a guest post this week.

    Tax return time is upon us in earnest, and now is the time to get the hassle out of the way before more fun stuff arrives – like parties and eating lots!

    It’s easy to think of your self assessment tax return as just being about the expenses. It isn’t as simple as that unfortunately.

    There are lots of reasons you may need to file a return: self-employment is only one of them.

    • Are you a director of a company?
    • Do you rent out a property or a room in your house?
    • Has HMRC sent you a return and told you you need to do it?
    • Do you have a job as well as freelance?

    While doing your bookkeeping takes up most of the time involved, it’s only one aspect, and the others are equally important. Your tax return is about declaring income to HMRC and you need to make sure you get those parts right, as well as having your accounts in order.

    Here’s a quick check list of what you need to think about.

    Employment

    • Have you any part time work? Did you finish full time work in the last tax year?
    • Get your P60 as you’ll need to give details
    • If your self-employment made a loss, you may be able to claim a refund against tax paid in your job

    Being a company director

    • You need to file a self assessment tax return if you’re a director

    Self employment

    • You need to declare any income , capitals items (eg. a computer) and expenses in your business

    Partnerships

    • If you’re in a partnership, you’ll need to file a partnership return and both partners (not just you) need to file a self assessment tax return

    Property

    • You’ll need to complete the property pages if you rent out a property to someone else, even if you’re an ‘unintentional’ landlord. You also need to keep records of income and expenses like you would for a business
    • You also need to declare if you rent out a room in your house and you may be able to take advantage of the Rent A Room Scheme

    Interest, dividends, shares

    • Do you have savings that aren’t in an ISA? The interest needs to be declared although it’s usually already been taxed
    • If you receive income from dividends they also need to be declared (that’s also those companies you’re a director of)

    Benefits, foreign income, trusts, capital gains, pensions

    • Income from abroad, trusts and capital gains (eg. selling a house or major asset) need to be included. If you have any of these, it’s a good idea to ask for help, as they’re complicated areas that are easy to fall foul of
    • There are also some benefits that need to be reported if you received them in that tax year, eg. Jobseeker’s Allowance
    • Some of you may also have student loan repayments which need to be included

    See, it’s not too difficult, apart from a few areas (that pesky capital gains again).

    It’s not that hard though. It only gets tricky in certain circumstances and you need to know that’s when to ask for help.

    For your expenses, you also need to know what’s allowed all of the time, what isn’t allowed all of the time, and what’s allowed some of the time (that’s the tricky bit). Clothing, foreign travel and food are examples of what you need to keep an eye on.

    If you’d like help, email me and we can arrange a chat free of charge. I do offer a Notes To Help You Do Your Own Tax Return service and a Checking Your Own Return service if you would like help but don’t want to outsource completely 🙂

    Oh yes, and always have a brownie when doing bookkeeping or tax returns. It’s essential as far as I’m concerned.

    Rosie Slosek runs One Man Band Accounting, supporting one man bands in the UK with hassle and fear-free accounts mentoring and tax returns, with a home made brownie for every client.

    She’s also on Twitter, LinkedIn, Facebook and Google+.

    Start your week well and sign up for her free Accountability email every Monday morning at 8am.

     

  • Freelance Finance: Living with a feast or famine income (Guest Post)

    Feast or Famine

    This week, the lovely Leanne has written a guest post on the feast/famine cycle of freelancing – something that a few people have asked about recently. Read on for some useful advice on how to deal with the up and down financial situation of working for yourself.

    There’s nothing quite like being able to work for yourself. It’s liberating to know you’re your own boss and it offers a kind of freedom like nothing else can—yes, it may be hard work but you get to reap the rewards of success, but it isn’t without its issues. There’s one aspect of freelancing that doesn’t always get the attention it deserves yet can be tough to get accustomed to, and that’s the feast/famine cycle.

    Think freelancing means you’re going to be rolling in cash month in, month out? Sorry to burst your bubble, but it’s time to think again. Yes, your earnings can technically be limitless—you’re free to work as much as you want and can set whatever rates you see fit—but it isn’t always that easy. You have to actually get the work in for it to all come together, and unfortunately it doesn’t always go according to plan.

    It doesn’t matter how effective your marketing efforts are or how many steady clients you have, you can never tell what’s around the corner. You don’t have the luxury of having a fixed income each month which means you need to be prepared for the fact that some months will be better than others—in fact, some months you could have so much cash coming in you don’t know what to do with whilst others you’ll be scraping the pennies together.

    And don’t think it’s an issue that only the novice freelancer can face. Yes, it’s always going to take a while to build up a solid foundation but even the most experienced of freelancers can face the dreaded famine from time to time, and that means you need to take precautions. So just what can you do to keep things on an even keel? Well, here are a few tips to bear in mind:

    • Save for a rainy day. You need to get into the habit of saving straight away. It can be tempting to treat yourself when those first few invoices start coming in, and whilst you need to celebrate you also need to start putting a bit of cash away, just in case. You never know when times could get tough, after all…
    • Don’t be cocky with money. When times are good it’s easy to start getting a bit reckless. You might shop in slightly more expensive places, go to pricier restaurants or simply treat yourself more often, and whilst you deserve a bit of luxury you need to stay sensible. Yes, you want to bask in your success, but that invoice you just got paid? It could be the last one you get for a while, so don’t get cocky.
    • Don’t get complacent. You’ve got a steady income, a solid base of clients and plenty of projects to keep you going, so you hold off on the marketing and let yourself relax for a bit. But what about when those projects reach their conclusion? What if clients decide they don’t need your services anymore? It can be a huge jolt back to reality and can put a serious dent in your income, so always keep up with your marketing efforts and keep a lookout for new income streams.
    • Remember the tax man! Ok, the tax man may not be high on your Christmas card list, but that doesn’t mean you can forget about him. He’s reviled for a reason—don’t pay your tax and you’ll suffer the consequences, and don’t leave it too late to start thinking about saving. You may not be getting money automatically taken out of your paycheque but you should treat it in the same way, so make sure to save a bit back each month (ideally in a separate savings account so you can keep track of things) because there’s nothing worse than knowing you’ve got to raise thousands of pounds out of nowhere.

    It’s all about being sensible. Going freelance can give you huge amounts of freedom but it needs more dedication, commitment and perhaps even common sense than any other way of working, so the rule to remember is this—enjoy the feast, but prepare for the famine!

    [custom_author=Leanne Richards]

  • Self Employed? Five ways to prepare for your tax return/Self Assessment

    Preparing and completing your Self Assessment in your first year of self employment is a tricky thing to do, particularly if you’re naturally a little disorganised like me. The end of my first year in self employment came around surprisingly quickly, and I was left with a pile of receipts, a bank account that contained far too many trips to Nandos and New Look and a mad panic to get it all into some form of order. I’ve no doubt that this meant I missed quite a few receipts or tax-deductible activities thanks to my own lack of organisation.

    My second year has been a lot more organised, and it’s mainly because I learnt the following lessons…
    Five things to do when preparing for your tax return
    • Keep all your receipts, train tickets and email confirmations in a file/folder, and make a note on each item reminding you what it’s for. Basically, anything you purchase for business reasons. It’ll save you a lot of time when the end of the year comes and you’re desperately searching through your diary/email to find out what a receipt was for. Invest in a decent printer so you can print off any confirmations as soon as you get them. I’ve just purchased this Canon wifi printer to do this, and it’s a bargain at £34.95 (plus tax-deductible)!
    • Consider a business bank account. Or avoid putting trips to McDonalds or La Senza on your card. Neither looks particularly professional (as I discovered), and it makes it easier to work everything out if all your spending activities on one account are business-related. You could always get a credit card just for business purchases if you don’t want to open a new bank account.
    • Set up a great invoicing system, so you can hit the print button at the end of the year. I really like Freshbooks for easy invoicing, and you can enter your expenses there too.
    • If you can afford it, get an accountant. They’ll keep you in check throughout the year, give you guidance and you can hand over all your documents at the end of the year for them to file a tax return on your behalf.
    • Aim to put away 30% of your salary each month in savings. This should cover your tax bill, and any other small business expenses. Then if you’ve got anything left after paying your bill, you can spend it on a little self-congratulatory trip away (Or, in my case, shoes). Much better than freaking out about a chunky tax bill that you haven’t prepared for.

    You might also like to have a look at HMRC’s guide to self employed tax returns to find out how to sign up, fill in your form and what dates your form have to be in by. They’re a fairly friendly and helpful bunch, so you could always give them a call if you’ve got any further questions.

    Do you have any top tips for anyone doing their tax return/Self Assessment for the first time? Or have you made a tax mistake others can learn from? Share them in the comments!

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