Self-assessment made easy - has a nice ring to it! Like many freelancers, you most probably want to forget the whole ordeal, spend your hard-earned money on things that matter and pretend like tax ain’t no big thing…until next year. However, self-assessment doesn’t have to be stressful, especially if you start planning now. Here is some handy freelance advice to help.
Self Assessment made easy step1.
Prepare now (early December) so that when January 31st rolls around, you are not suddenly floored by the amount of money you owe the taxman. If you've been diligent and recorded all of your earnings and expenses, now's the time to open up that spreadsheet.
Dig out any outstanding receipts or invoices and add them to your records. Hopefully, you will owe a large chunk of change as that will mean you’ve had a successful year, but if you didn’t budget for this payment, it's time to take action. Before you figure out the exact amount you owe, add up all of your earnings and work out what 20% of it is. This will give you a rough idea as to how much you're going to have to pay at the end of January. If you don't have the money in the bank to pay for this, you've still got a couple of months to figure something out.
Self Assessment made easy step2.
Register with HMRC as early as possible so they are aware that you will be submitting a tax return with self-employment pages – this will save an awful lot of agro and expensive phone calls further down the line. However, you can put off registering with HMRC until you know if your business is capable of making money. You also need to register your business with HMRC in good time, as you will need an activation code to complete the self-assessment and it can take several weeks for HMRC to get it to you, so it is wise to start this process well before Christmas.
Self Assessment made easy step3.
Be vigilant when you draw up your accounts and don’t forget to include all income that has been invoiced, all costs that you wish to claim back (these can be any costs incurred during the course of a job, including travel, kit and any necessary overnight stays) and large pieces of equipment that are necessary for your business, as long as you can prove that they are used solely for business purposes.
DID YOU KNOW: Freelancer Club Membership can be classified as an expense and written off at the end of the year.
It is likely you will have a full or part-time job on the side of your freelancing work so make sure you don’t forget to record other sources of income. Collect the forms, such as P60 and P11D, for this income from your employer - you only need the forms that relate to this tax year. It is also wise to understand the tax implications of freelancing alongside your job so that you can accurately record exactly how much tax you will owe.
Don’t leave your self-assessment to the last minute. Although it is easy to put it off, the repercussions of doing so could mean a nightmarish start to the New Year. If you follow this advice and take a bite-sized approach to self-assessment, come January you will be laughing.
