Taking the step into self-employment is both exciting and daunting. However, the tax side of things can be difficult to navigate. If you are newly self-employed, it is normal to feel unsure abut what is expected when it comes to HMRC, deadlines and everything in between.
At Hanley & Co. Accountants, this month’s blog offers tax advice to newly self-employed individuals. For information, call us in Staveley, near Kendal on 01539 821869.
Missing the Registration Deadline with HMRC
Once you start earning money from self-employment, you need to register with HMRC as a sole trader by 5th October, following the end of the tax year in which you started. If you miss this, you may face penalties.
As soon as you start trading, register via the HMRC website. You will receive a Unique Taxpayer Reference (UTR) number, which you’ll need for self-assessment tax returns.
Not Keeping Proper Records
Good record-keeping is a legal requirement. If you are investigated by HMRC, you must be able to back up your figures. Also, clear records make tax returns easier.
Keep track of all income, receipts, expenses, invoices and mileage. Use accounting software to store receipts, create invoices and ensure you are Making Tax Digital compliant.
Don’t Mix Personal & Business Finances
Using your personal bank account for business transactions can make things very confusing. It makes it more difficult to work out business costs and cause issues during tax return season.
Open a separate business bank account. Although it is not legally required, it keeps all finances clean, tidy and professional.
Forgetting to Budget for Your Tax Bill
In self-employment, you pay tax after you have earned the money. It is easy to get caught out if you haven’t put money aside for your January tax bill, or for ‘payments on account’. These payments are due by midnight on 31st January and 31st July.
Ensure You Get Professional Advice Early On
Many new sole traders try to manage everything themselves to save money. However, many also make costly mistakes and miss out on allowances they didn’t know existed.
At Hanley & Co. Accountants, we can help you set up your business correctly and know what records to keep. Additionally, we can help you to avoid penalties and overpayments on tax. Being self-employed can be rewarding, but it does mean taking responsibility for your finances. By getting things right from the start, you will save time, avoid stress, and grow your business successfully. We also provide business start-up advice.
Contact Hanley & Co. Accountants
If you require self-employment tax advice, contact Hanley & Co. Accountants in Staveley, near Kendal. Serving across Cumbria, call us on 01539 821869. Alternatively, send us a message via our contact form and we will be in touch.
