So you’re self-employed. Great. There’s many pros to this – like choosing when you want to work, being your own boss, and remaining flexible with your holidays. But like with many things there’s always a flipside. Sorting out your tax, for some people, is a headache.
If you’ve worked as a pay-as-you-earn (PAYE) employee, you probably took it for granted the convenience of having your tax deducted off your wage slip. Well now that you’re self-employed things are about to change.
It’s not doom and gloom though, far from it in fact. By keeping on top of your taxes you can sleep easy knowing your money is being handled responsibly. Here are a few things which, if you apply correctly, will keep the eyes of the tax man off your case:
1) Create a good record keeping system
You might be wondering what sort of records you need to keep. Well here’s a list to help you:
- Mileage records (if you use vehicular transport for your work).
- Bank statements.
- Receipts for purchases.
- Your P60s if you are also employed.
You can keep these records stored on your computer, or the good old fashioned way on paper, or both, whatever feels more comfortable to you. If you do decide to store your records electronically it’s important to keep a backup at all times and make sure the information is saved in a readable format.
Remember, it’s vital you keep records of all your purchases and expenses as well as all of your sales and takings. This allows you to make a profit/loss list and puts your records in much better shape to be analysed by HMRC if the situation arises.
2) Consider hiring an accountant
You may think you’re wasting money on hiring an accountant but many people are amazed by the amount of money they save. An accountant can make your business grow and maximise profits by carrying out tasks such as:
- Advising you on VAT and PAYE.
- Doing your end of year accounts.
- Making sure you don’t receive any fines for late payments.
3) The Construction Industry Scheme (CIS)
The CIS is a set of rules as to how payments should be made from a contractor to a subcontractor and the amount of deductible tax. If you’re reading this you’re most likely involved in the construction industry. Which is why it is important, when talking about tax, to understand how the CIS works.
As a contractor you’re expected to keep detailed accounts of payments to subcontractors and tax deductions. Every month you’ll need to provide HMRC with a tax return form detailing all of your payments and the tax deducted for the subcontractor. You can find this form on the HMRC website.
4) Be accurate
Being detailed is one thing, but making sure all the information is correct at the same time is another. Go through your records scrupulously making sure your figures and names hold up.
Updated on Wednesday 12th June 2013:
5) Make sure you are registered
Being registered as self-employed may sound like common sense to you, but it is not unlikely for a sole-trader to not have begun their registration for multiple reasons. However registration is not something you should be afraid of, as it can be very easy as long as you use an agency to sort out your registration on your behalf. SelfReg can manage your self employed registration and gives you all the advice you need to go through the process.
If you follow these broad guidelines you’re unlikely to be beaten by the infamous opponent that is UK tax.