This thread about filling in a tax return is essential (and reassuring) reading for freelancers everywhere
It’s that time of year when freelancers everywhere are filling in their tax return or trying to find the money to pay what they owe (or both).
And this thread by @HeatherParryUK is absolutely required reading for anyone who’s ever had to fill in a tax return. Wish we’d read it before the first time we did it (back when it was still on paper. Imagine that!)
as most of us freelancers will be scrambling to file and/or pay our tax returns this week, here's some very boring advice from someone who's been doing their own for a few years now and has learned a lot of things they just entirely neglect to tell you when you are a freelancer:
— Heather Parry (@HeatherParryUK) January 27, 2020
1) At the end of your first year as a sole trader, you have to pay 100% of the tax you owe on what you made the previous year. At the end of the second year, you have to pay all that PLUS 50% of the tax you'll owe for the next (current) year. No one mentions this ONCE.
— Heather Parry (@HeatherParryUK) January 27, 2020
2) Because you're paying tax on a total amount of money you haven't yet earned, you have to guess. This is called making a payment on account, and you have to pay 50% on Jan 31st, with your other payments, and 50% on July 31st. You might be conservative in your guess. Don't be.
— Heather Parry (@HeatherParryUK) January 27, 2020
3) If you guess too low, they will charge you interest on what you *should* have paid. So you either guess too high & overpay your tax, then have to wait for HRMC to pay it back, OR underguess & have them charge you interest for the difference when you finally file for that year.
— Heather Parry (@HeatherParryUK) January 27, 2020
4) Sometimes if you pay on time they will just randomly charge you late payment fees. It is up to you to keep a check on what they are charging you and query this, because it can add up (to about 400 quid, in my experience). The onus is on you to prove you paid on time.
— Heather Parry (@HeatherParryUK) January 27, 2020
5) Sometimes when you file your return, you'll log on a week later to pay and find two entirely different numbers given for what you owe. Then you ring them and they give you a third, totally different number. Pay the one they give you & get it in writing to prove what they said.
— Heather Parry (@HeatherParryUK) January 27, 2020
6) There are a lot of things you can claim as expenses. For instance, if you're a writer, your expenses can include books, film tickets, travel to meetings, food for when you're travelling for events, your phone contract, a new laptop, even clothes for events.
— Heather Parry (@HeatherParryUK) January 27, 2020
7) If you work from home, you can charge for a portion of your heating bills, broadband, even part of your rent/mortgage. Accurate information around these last two points is hard to come by—I recommend @QuickBooks which will help you figure this out.
— Heather Parry (@HeatherParryUK) January 27, 2020
8) You shouldn't need to file the specifics of your tax return, just the big numbers. However, in the event that you are audited, you will need to have kept ALL YOUR RECEIPTS. Again, @QuickBooks is great for this because it lets you take photos of all your receipts and store them
— Heather Parry (@HeatherParryUK) January 27, 2020
9) It's best if you have an entirely separate bank account just for your 'business' (i.e. freelancing) stuff. It just makes things a lot easier down the line if you do end up being audited—or even just for working out your expenses.
— Heather Parry (@HeatherParryUK) January 27, 2020
10) The single best thing you can do IMO is to have a 'tax' account, into which you pay 20% of everything you earn. Don't *just* save the amount over the tax-paying threshold, because you have to pay National Insurance, etc. Just put in 20% of everything that you earn.
— Heather Parry (@HeatherParryUK) January 27, 2020
11) This way, you should always have slightly too much in that account, which acts as a buffer for any unexpected charges. If you jump up into a higher bracket you'll obviously have to start putting a higher percentage into that tax account. But still, it helps.
— Heather Parry (@HeatherParryUK) January 27, 2020
12) If it all starts getting too complicated, don't go with those online tax accountants that you never meet, because they are absolutely terrible. Get some recommendations from people who work in your industry and pay for a decent accountant.
— Heather Parry (@HeatherParryUK) January 27, 2020
13) If you're nervous about filing your tax return (and who isn't?) get some other freelancer pals together and make a night of it. Get some food, some beers & help each other out. Even if it's just someone to run the numbers by, it takes the stress off. Eat cake when you're done
— Heather Parry (@HeatherParryUK) January 27, 2020
14) Even after several years you will type HRMC instead of HMRC in tweet threads but it doesn't matter and you can pretend its an anti-establishment position you're taking rather than just a highly-caffeinated typing error.
— Heather Parry (@HeatherParryUK) January 27, 2020
Source @HeatherParryUK Image Pixabay
