Self employment is a great way for many people to take control of their careers and the rewards can be huge, but there is one sting in the tail of the freelance lifestyle that hits every year: the dreaded tax return.
Sadly, the deadline for Self Assessment is 31 January, which for all but the nauseatingly well-organised means a last-minute panic right after Christmas. Are you one of many freelancers currently doing anything to avoid looking at your accounts?
If so, you might appreciate these words of advice from the Dollymix crew, all of whom have worked freelance at some point or another in their careers. I’m sure we don’t need to remind you that you’ll have to pay a fine if you’re late in submitting your return and payment, but if you want to scare yourself into action you might want to familiarise yourself with what those penalties are.
So, what can you do to ease the pain?
1. Get an accountant.
Getting an accountant almost always makes financial sense when filing a tax return. Unless the total amount you expect to pay is around £500 or less (or if you just particularly enjoy paperwork – I’m not kidding, these people do exist) then you’ve got absolutely nothing to lose by getting an accountant. In actual fact you’ll pay about £200, but it will almost certainly be worth your while to appoint a qualified professional to do the sums for you.
Many people also find it helpful to have someone giving that much needed kick up the backside and to prompt them to dig out and pass on all the necessary paperwork: accountants are generally quite well versed at this!
The best tax accountant get their gigs through word-of-mouth, so speak to other freelancers and get personal recommendations to find the best person for the job. There’s no need to look locally: all correspondence can be done over the phone or online. If, however, you can’t bear the idea of someone going through your paperwork (even though they’ve seen it all) or you’re reading this on 29 January and you really have left it too late to call one in, read on…
2. Get online
Filing your tax return online is the best way to do it, and very few people actually choose to submit paper returns nowadays. As well as the ease of being able to correct mistakes at the click of a mouse, HMRC’s online service does the calculation for you, removing that niggling worry that you might have got your sums catastrophically wrong. It’s also too late to file a paper return at this time of year, since the deadline is 31st October.
Other online services you’ll want to have running smoothly when you come to file your return include your online banking services (not just for your current account but any savings, pensions, etc) and also your utilities. You’ll want to be able to refer to these if you have a home office, so you can see how much you spend on gas bills, lighting etc so you or your accountant can figure out how much of these figures to expense. If you’ve saved your bills in one place you’re already ready to go, but having them online makes life much easier.
3. Watch out for the ‘hidden’ paperwork
As well as the obvious financial records like receipts, bank statements and other paper trails, you may need paperwork relating to previous or current employment: this is particularly important if you’ve changed jobs recently, work part-time or have gone from employed to self-employed within the last tax year.
Make sure you can contact your previous employer if so, and can request forms such as P45s or P60s, which the tax office will want to see. These can be generated by HMRC if necessary, but it’s much better to have them in hand.
Ready to go? Here are some useful numbers, websites and other resources to keep close by while you file your return.
At-a-glance tax guide
- Tax Year: Self-assessment is now due for the tax year April 2010 – April 2011
- HMRC self assessment helpline number: 0845 900 0444
- Deadline for paper tax return submission: 31 Oct
- Deadline for online tax return submission: 31 Jan
- Self Assessment Online at HMRC
- HMRC login page
We’d like to take a moment to thank Abi Silvester, from DollyMix.tv for providing us with this post, which you can read in its original context on their website.
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