3 handy tax tips for sole traders
If you are a sole trader then you will be well aware of your tax responsibilities. Making sure you keep appropriate records in this regard and knowing when to submit your tax return are naturally key. Of course, if you have an accountant to handle all this for you it is a little easier! If you are keeping on top of your own tax requirements though, read on for some handy hints in this area:
1. Remember your N.I. as well as your tax
Although handling tax affairs as a sole trader is fairly straightforward, you must remember to consider your National Insurance contributions too. These need paying as well as your income tax to HMRC. The class of National Insurance you will pay (and by definition the amount) will differ depending on your business's annual profits from the tax year in question. If you are not sure which N.I. class you fall into, contact HMRC so they can confirm this for you.
2. Don't let payment on account catch you out
If you are new to life as a sole trader, then this is one point that can trip you up. If your income tax and National Insurance levels rise above a set amount in the first tax year, then this will require you to make payments on account. In simple terms, this will mean that twice in that year (the end of January and end of July), you will have to pay half of your estimated tax bill for next year from figures based on the previous year. Many traders are surprised about having to pay this extra amount, so make sure to factor it in for your first year's return.
3. Remember to claim back all costs you can
Many freelancers who do their own books miss out on claiming back all the business expenses they could do. This in turn leads to a higher tax bill when you submit your annual return. Make sure to include all allowable expenses such as internet use and heating and drive your tax costs down as much as possible.
If you would like someone else to do the work for you in terms of taxes, give us a call today. As a firm of professional and experienced chartered accountants based in Sussex we can take the burden off you. This allows you more time to spend on your core business and less time filling in tax returns!
To discuss your small business needs get in touch with our Business Services Partner Robert:
Tel: 01825 763366
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