Seeing a steady stream of income sprout from your hard work is a beautiful feeling. Freelancers and contractors may feel they can finally rest at ease once they’re able to sustain a living. However – the taxman will be very interested in what you’ve managed to earn, and you need to be proactive about managing your finances to keep him happy.
There are a few simple ways to avoid tax problems when the time comes to cough up. Let’s run through them, to help you prepare for those all-important HMRC deadlines:
Know your deadlines
As a sole trader, you’ll need to submit your self-assessment tax returns by the 31st January, and paper receipts even earlier on October of the same date, following the end of the financial year in April.
If you’re operating as a limited company, things are somewhat different. You’re liable for corporation tax, which is measured over a 12-month period that matches your company’s financial year. Missing any of these deadlines will incur late penalties and can result in legal repercussions, so it’s vital to take note of when your tax returns are due.
Save, save and save some more
Maybe it’s common sense, but it’s still worth repeating: plan ahead for your tax returns in every conceivable manner. Record expenses, payroll information, travel costs and your income throughout the year. And if you’re having a particularly fruitful patch, remember that a greater amount of tax will be due, so save more than usual.
Freelancers can find it disconcerting to be hit with massive tax jumps as their client base gets bigger. When you’re new to all of this, the important thing is not to bury your head in the sand. Stay in touch with your accountant and monitor your liabilities, to ensure that you don’t get caught out when a deadline approaches.
Have a good hand by your side
We may be biased, but we can’t stress enough how valuable an accountant can be. Your business may be your baby, but messy books and figures can undo it faster than a loose thread in the wind. Choosing expert advice from a specialist freelancer or contractor accountant will give you peace of mind that you’re managing your finances effectively.
Bright Ideas is proud to work with FreeAgent software especially for this purpose. With a range of yearly plans to choose from, you can stay in cahoots with one of our accountants no matter where you are, glancing over your revenue, expenses and liabilities without any trouble. It’s all available in real-time, providing you a complete picture of where your venture is going, and what it must do to get there.
It’s said that only two things in life are certain: death, and taxes. Don’t let tax assessment come at the death of your optimism for making it as a freelancer or contractor. With Bright Ideas Accountancy, you’ll be secure from financial fiasco, all year round. Call 01661 669 4221
