Taking the Terror out of Tax Returns — 3 Top Tips
With a rising number of people ditching the office to become their boss and an all-time high of self-employment, a drastic change in financial responsibility is on the minds of many.
Fresh faces to the solopreneur world may well be feeling intimidated by what comes at the end of the tax year, and the mere mention of a ‘tax return’ can strike fear into the hardiest of souls… But fear not!
Though it may be a daunting prospect, completing the HMRC Self-Assessment is not as tricky as you may think and advice is widely available.
We’ve compiled the essentials into a neat little list for you. You’re welcome.
1. Keep EVERYTHING
Keeping a record of your income and outgoings is of course an essential, though a more comprehensive approach is often overlooked despite being a powerful business tool.
All the little pieces of information relating to your business add up quickly, and storing them may seem like overkill, but you’re ultimately building a super informative paper trail that paints a clear picture of your finances — useful beyond the callings of HMRC!
It’s all in the details: contracts, invoices and bank statements are a good start, but noting outgoings is beneficial too. Luckily for you, running your own business means that a range of expenses is tax-deductible. Think heating bills if you work from home, a new computer, or even a coveted ticket to one of our own fabulous BWi BIG Events. Handy, right?
Declaring your allowable expenses can keep costs down, business booming and your mind at ease; so, keep your receipts! It won’t be essential to provide them with your annual tax return, but just in case you’re subject to one of HMRC’s random spot checks, you’ll be armed with all you’ll need and more,
2. Take Your Time
Alongside your newly acquired, sharp book-keeping skills, preparing your documents ahead of time can prevent an overwhelming rush as deadlines loom. Collating information in a centralised place, and building it as you go through the year means no last-minute hunting for that one invoice you put in a ‘safe’ place. Online Cloud services are excellent for this.
Registering yourself as self-employed alone can take up to 20 working days, so accommodating the processes that are out of your hands is wise. Putting off your payment beyond the deadline can lead to some pretty nasty fees — £100 for up to three months of tardiness, and less-than-appetising interest fees.
If you need to send a Self-Assessment tax return, it’s often recommended to have it in order as early as possible in the new tax year, so planning your year of expenditure is a little easier. Still, if you can’t afford your tax bill from the previous year, don’t panic. Communication is key, and letting HMRC know in good time will enable you to embrace one of their payment plans and qualify on time. This takes us to our next tip…
3. Accept Help
Going solo can feel liberating, but nobody will blame you for being a little tentative. We all need a little help from time to time, so calling in some favours when navigating your new solopreneur tax situation is no bad thing.
Seeking advice from an accountant may seem excessive, but could take the pressure off as you get the ball rolling in your new venture (and be cost-effective if you feel you’re at risk of misrepresenting your earnings). Someone to glance over your books to check if everything is in order… yes, please.
A great alternative to a number-inclined individual is a piece of dedicated accounting software. QuickBooks is a well-known software option that can help with all areas of small business accounting; from expense tracking to cross-currency income management
Just remember: HMRC are on your side through all this — the self-assessment is optimised to be user-friendly, and you won’t have to face any of it alone. Their YouTube is also fully kitted out with a nifty, frequently updated set of videos with step-by-step guides on getting the deed done.
And Don’t Forget…
The BWi community thrives on getting to know, advising and empowering people like you! Membership is free and we’ll be with you each step of the way. If you’d like to know more, feel free to get in touch via one of our supportive Facebook groups,