3 top tax tips for freelancers
The numbers of people working freelance in the UK are rising, with data from the 2017 Labour Force Survey estimating that there are almost 2 million freelancers, which represents 6% of all workers. While moving away from the rigidity and norms of a 9-5 job can bring many freedoms and opportunities, it also presents several unique challenges.
One of the most important responsibilities of freelance work is ensuring that your tax returns are completed accurately on time, as well as managing your taxes and accounts throughout the year. This can often present a steep learning curve for many; however, there are a number of tips you can use to optimise your tax bill while also adhering to all of HMRC’s requirements.
1. You can claim tax back on your capital assets
Items that cost money to run for your work are considered to be business necessities, and as such you are entitled to claim a proportion of these costs back as business expenses. Laptops, software, cars, mobile phones, internet costs and similar are all covered. As such, ensure that you record the amount of time these items are used for your work and how much is business, and you can claim a proportion of these costs back, with that proportion directly correlating to their usage while working. Tax can also be claimed back on the costs of where you work too, be this your attic or spare room which double as your office.
2. Ensure that you keep accurate and up to date accounts
While working freelance it becomes easy to focus on the physical work you are producing and ignore the administrative side of things. However, it becomes much harder to retrospectively keep your accounts updated, and needing to quickly update them if you are ever asked to prove your finances can be extremely stressful which is likely to lead to mistakes. Setting aside a fixed period each week to update your records will help you in the long run, as well as ensuring that you always have a clear understanding of your financial position.
3. Use a tax advisor
There are many financial rules and regulations you have to adhere to when working freelance, and ignorance of this is no excuse for non-compliance. Any mistakes in your taxes will be swiftly picked up by HMRC and may lead to huge amounts of time and energy attempting to solve these, not to mention the risk of fines. By using a tax advisor, you can ensure that your bookkeeping and accounts are properly managed, allowing you to continue working with the peace of mind that your taxes are all sorted by experts.
To discuss your tax situation as a Sole Trader or freelancer in Sussex get in touch with our Business Services Partner Robert who can discuss the best path with you:
Tel: 01825 763366
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