Tax For The Self-employed and Freelancers
The UK is currently home to a fast-growing community of freelance workers, with official figures showing that the number of people choosing to become self-employed rather than follow a more conventional employment path has risen by around 14 per cent in the past decade. Greater flexibility and the opportunity to enjoy a better work-life balance are the most commonly cited reasons for going freelance, but many also enjoy having the opportunity to work on a variety of projects across different sectors, rather than being limited to a single field.
When you become self-employed, you take over responsibility for paying income tax on the profits you make from your earnings. For those who have previously had tax deducted automatically through the PAYE scheme, this can seem a little daunting, but in reality, the system is relatively simple, especially for those whose earnings keep them within the lower tax threshold.
Your annual profits are calculated by deducting your business expenses from your overall income. The expenses you are entitled to claim vary according to the nature of your business, but generally speaking, any costs you incur in the course of your business can be deducted.
Examples include the running costs of a dedicated premises or a proportion of the cost of running your home, if that’s where you are based. You can also make deductions for travel and accommodation costs for business trips, stationery and other consumables and for wages that you pay anyone you employ.
After your first full year as a freelance, you’ll need to pay your tax for subsequent years in advance, in a process known as making payments on account. The total amount is split into two, with one due at the end of January and the other at the end of July, and the figure payable based on your earnings for the previous year.
Hiring an accountant to prepare your tax return allows you to focus all of your time and energy on your business. Keeping effective records throughout the year simplifies the preparation of your return, helping to keep accountancy costs to an absolute minimum. Allsquare can advise on the latest allowances and requirements and can provide you with a tailor-made service that helps you never pay a penny more in tax than you need to.
Our cloud-based accounting solutions are ideal both for those just starting out as freelancers and for more established workers, as they provide easy access to your accounts from anywhere in the world. Cloud-based systems also make it easy for your accountant to access your information in the run-up to your tax return becoming due.
If you are self-employed or a freelancer and would like more information about tax, or any other aspect of accounting, call Allsquare on 0131 343 1510.