Setting up as a sole trader
When you decide to set up on your own; whether as a freelancer or a one-man band business, you need to be aware of your tax responsibilities.
Not only that but you also need to know what you can and can't claim for, and how to keep your evidence.
This can seem like a scary step, particularly if you're going freelance to fulfil a passion, however it doesn't have to be. There's some basics you need to know to make sure you keep on the right side of HMRC, but after that you should be good to go.
Keep a record of everything
From the get go you need to keep a record of your income and expenditure so that you can easily produce a tax return. Every sole trader needs to produce an annual self assessment tax return by 31st January for the previous tax year.
So for example, for the tax year 18-19, the deadline for submitting your tax return will be 31st January 2020.
You can use a simple excel spreadsheet for this, keeping income on one sheet and expenditure for another. Be sure to keep all your receipts for five years after the submission deadline for that year, in case you're audited.
Don't miss the tax return deadline
If you don't pay your tax return on time you'll get a penalty of £100. This will increase after three months, so make sure you get it in on time. If you keep records as you go along, you shouldn't find this too difficult.
Get help if you need it
If you're really bad with tax, it may pay to get an accountant; particularly if you expect to receive a good profit. They can make sure you know what your deductions are, and ensure you pay the right tax and national insurance contributions.
That frees you up to do what you love, as well as making sure you fulfill your responsibilities.
Set aside your tax and NI in advance
Use an online tax calculator to estimate what you're likely to owe on projected income and set that extra amount aside each month. That way you won't be hit with a big tax bill at the end of the year.
To discuss setting up as a Sole Trader 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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