Freelancer tax obligations for 2013
You’ve bravely taken the plunge and entered the big bad world of business alone, with nothing but the tools of your trade and a good helping of talent to see you through. Freelancers come in a variety of guises, and with the inexorable rise of the internet, there are more opportunities than ever before. Unfortunately, being a freelancer isn’t all about creative freedom; whether you’re a writer, photographer, web designer or developer, you won’t be able to escape the paperwork altogether, as once a year you’ll have to get to grips with your tax payments. So, where on earth do you start…?
Registering with HMRC
Whether you plan on getting into the nitty gritty of every aspect of your freelancer tax obligations, or handing over the reins to a tax accountant who will complete your self assessment tax return on your behalf, there are some responsibilities you simply can’t avoid, one of which is registering with HMRC.
Registering with HMRC should be your first priority, as the tax authority can be quite unforgiving when punishing those who don’t. You’ll also need to arrange to pay your Class 2 National Insurance contributions straight away, which for 2013 will amount to £2.65 a week. These can be paid simply by setting up a direct debit. You may be exempt from National Insurance payments if your earnings for the 2012-13 tax year are less than £5,595. Once you have registered with the HMRC, you then need to begin recording all of your related business income and expenditure.
Paying and calculating your annual payments
Perhaps the best way of completing your annual tax return is to do so online. The majority of freelancers will be web savvy enough to get to grips with the online returns system, and most will find this far easier than coping with all that infuriating paperwork. The advantages of filing your freelancer tax return online are threefold: online returns can be filed at a later date than paper returns; you will receive an immediate confirmation once the return is received, and perhaps the biggest bonus of all, much of your tax is actually worked out for you. If you complete your tax returns online they should be filed by 31 January after the end of the tax year or 31 October for paper returns.
Expenses and tax breaks
Aside from simply keeping a note of your income, there’s another side to the tax game, and that’s your expenses. No one enjoys paying their tax bill, but at least there’s an element of giving from the good people at HMRC. The expenses system allows freelancers the opportunity to claim tax breaks on business related expenses, including anything from a laptop to office furniture. As with your income, accurate records should be kept and receipts will be required for these claims to be successful. An element of caution should also be applied, as spurious claims could result in a penalty.
With that said, there’s no excuse for freelancers not keeping up to date with their freelancer tax obligations. And if you find your time is better spent focussing on your business rather than trying to get your head around what can be a complicated business, there are plenty of tax accountancy companies out there who will complete and submit your self assessment tax forms on your behalf.