Self Assessment: What freelancers need to know
The Self Assessment Tax Return deadline is an intimidating date in the diary of any freelancer. Here's our guide to taking the stress out of deadline day.
Becoming a freelancer is one of the most exciting and empowering career decisions anyone can make. However, professional freedom brings an array of questions. Do I need an accountant? What dates do I need to be aware of for the financial year ahead? And why is Self Assessment such a big deal?
For freelancers and those who are self-employed, this means declaring your earnings accurately to the government by filing your tax return by the 31st January. Failure to do so will result in costly late fees and being overcharged by HMRC.
This can all seem very daunting, especially if you’re new to the concept. Luckily, help is on hand. Experts at the free AI-based accounting tool Bokio have rounded up the most important things to know about Self Assessment, helping the 11 million estimated Brits filing their own tax return to handle their finances like clockwork.
Don’t wait until deadline day
Underestimating the time it takes to file your tax return is one of the main reasons for missing the January 31st deadline.
Spreading the process over a number of days can help reduce stress, and give you time to address any issues or queries before it’s too late. In the long run, you’ll save time and will be more likely to avoid the £100 fine and any interest payments for a late submission.
Understand what you can and can’t expense
There’s no doubt that running a business is a tough job, therefore making sure you’re being as tax efficient as possible is vital. Unfortunately, every year many people lose out, simply because they were unaware of the expenses they could have claimed for.
For example, whilst it’s well known that travel and stationary count as expenses, few people may be aware that staff uniform and clothing can also be claimed. To see a full list of expensable items check the official HMRC website.
Use a digital solution
Utilising reliable and free-to-use accounting software is a great way to cut down the hours spent doing tax returns.
Platforms like Bokio offer integrated features that allow income, receipts and expenses to be easily uploaded, organised and broken down, meanwhile bank feeds allow transactions from last year to be imported quickly, saving time.
Bookkeeping software can also create automated profit and loss reports, making it even easier to transfer the important figures you need before sending them to HMRC.
Better late than never
Never forget this mantra when you’re considering filing late! As HMRC fines increase over time, it is vital to get your Self Assessment completed and filed as soon as possible, or you risk significant financial penalties.
Just because you’ve missed your first deadline shouldn’t mean you give up entirely: there’s a big monetary difference between filing a few days after the deadline and six months later.
Try going paperless in 2020
For those still deciding on a New Year's resolution, a tidy and sustainable option for your bookkeeping is to go completely paperless.
Advanced tech solutions, such as apps with receipt capture functions, mean that you can upload and store receipts digitally. These receipts can then easily be attached and cross-referenced with the transactions imported using the bank feeds feature, helping you to save time and trees simultaneously.
Embrace good habits
Freelancers should keep in mind that being organised is the key to financial wellness and success! The Self Assessment deadline on 31st January is not the only financial deadline to be aware of. Crucial dates appear again in April, when the 2019/2020 tax year ends and the 2020/2021 tax year begins, 31st July, when the second payment on account is due, and 5th October, which is the second deadline for registering for the Self Assessment form online.
Utilising easy to use accounting software as a freelancer will not only help you keep track of these key dates, but also ensure you are budgeting your income efficiently, managing your cash flow, and staying thoroughly organised. By following the tips outlined above, your business will be sure to achieve financial success time and time again.
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