Moving into the freelance world from a work environment where admin – and especially tax administration – was dealt with by someone else, can be mind-boggling and a little intimidating. You can be at the top of your professional game yet still be flummoxed by the most elementary accounting concepts.
So, with that in mind, as we enter a new tax year, we asked Kenny – our very own plain-spoken master of numbers – to set a few things straight and hopefully make your first year as a freelancer that little bit easier.
So, Kenny, let’s say that this is the first tax year you’re embarking on life as a freelancer. What are they key dates to be aware of in the accountancy world?
There are a few key dates in the year. If you’re a limited company, the year-end will be the end of the month a year after incorporation, so if you incorporated on 10th March, for example, your year end will be March 31 each year (unless you change it manually, of course). Other dates kind of hinge on that one, so it’s as well to be clear.
And by ‘incorporate’, you mean…?
Form a legal organisation. When you incorporate your company, you make it official.
Sorry, Kenny. As you were.
Corporation tax is payable nine months and one day after the year end date (so, for our example, you’d need to make a note in the calendar for January 1st).
If you’re registered for VAT (here’s a VAT explainer article we made earlier), returns will be due every quarter. When you register for VAT you’d select when these fall. When we do this for our clients, we have the quarters line up with the company year end date to keep it all nice and organised. For example, if your year end falls in March, the VAT end dates would be March, June, September and December.
It kind of sounds like a moveable feast! So if the year-end, corporation tax and VAT vary from business to business, does that mean income tax payment deadlines vary too?
Well, no! Luckily these ones are more standard. Pay as You Earn (PAYE) is due quarterly, and in most cases this is between the 6th and 19th of July, October, January and April each year. The other big one is your Self-Assessment Tax Return (SATR), which is due by the January 31 each year, along with payment.
So that’s why I always see people looking all flustered after Christmas! What are the common mistakes that newbie freelancers make in their tax affairs?
It’s easy to think you can save money and just muddle along by yourself, but this can be a false economy. Having an accountant means advice is always on hand: after all, we’ve spent years training in the ins and outs of taxation so you don’t have to. If you’re ever unsure of anything accounts-related, you can always ask. It’s much better than finding out months down the line that you have been claiming items you shouldn’t have, or vice versa.
What are the specific documents that I need to be aware of as a new freelancer?
Well, a good rule of thumb is that anything with an HMRC header on it should be stored in a safe place, and the same goes for documents from Companies House. It’s also worth remembering that you need to make sure your accountant is authorised to liaise with HMRC on your behalf – definitely something best sorted out sooner rather than later.
I’m not sure if I’m using my business expenses to full capacity. Are there any basic guidelines or tips?
If an expense is for business purposes then it can be claimed, but it is difficult to give an extensive list as it can vary depending on what kind of business you have. Again, your accountant will be able to give the best advice on this – it really does change from one situation to the next. They’ll know the ins and outs of your business and be able to guide you.
Is there anything else I can do now to make my accounting life easier for the first tax return?
It’s a simple one, but ensure you are keeping good records and have copies of receipts for all expenses. If you’re a My Accountant Friend client you’ll have access to our software, which makes it incredibly easy to keep on top of everything and allows you to scan receipts via your phone and manage everything from your desktop.
If you’re wondering what you need to do to prep for the new tax year, feel free to give us a call at My Accountant Friend to talk it over.
DATES SUMMARY
PAYE (Quarterly): Due July, October, January and April – usually between 6th-19th of the month
SATR (Annually): Due 31 January, with payment
Company Year End: End of the month, a year after incorporation
Corporation Tax: 9 months and 1 day after Year End date
VAT returns: Every 3 months, dates dependent on when set your quarters at VAT registration
