Becoming self-employed can be a massive freedom, but it comes with some added chores, one being having to work out your own tax. For those with a regular income and no expenses, this can be straightforward. But for those with an irregular income, loans, staff, insurance schemes, an office and a company car – filing a tax return can be very stressful stuff. Make any wrong calculations and you could be in for a fine. If you’re currently dreading your tax return, here are some ways that you can ease the process and make it simpler.
Start saving now
Instead of having to scrape together the money at the last moment, spare having to pay your tax return in one massive chunk by setting up an account months before and slowly adding in money each week or month. If your annual tax return comes to £1000 on average – you can make this much simpler by paying out £20 a week. Calculate expenses as you go along or deduct it all at the end. Just don’t leave it all to the night before!
Collect receipts of expenses
Every business transaction that can be tax deductible should be recorded. Even if you’re unsure whether something is tax deductible, keep a receipt of it. Expenses can include a great number of things from a company vehicle to office equipment to lunch with a client. If you use your phone for business, you can deduct some of your phone bill from your tax, so keep onto any phone bill records. Similarly, if you work at home, rent and bills may be deductible to up to 10% – so keep onto those utility bill letters. Buy a file to keep all these receipts in.
Use tax preparation software
Even the greatest mathematicians are prone to human error. Avoid making silly miscalculations by downloading software that can digitally calculate your taxes and expenses for you. It will save you having to slave over a spreadsheet with a calculator.
Use software that’s applicable to your company. There are some expensive programmes out there for complex accounting, but if you’re only a small business, there’s no point paying for all these unnecessary functions. Use reliable programmes such as TurboTax and TaxACT Online. Keep your eyes peeled for coupons and deals – the web is full of them (for example this site offering a Turbo Tax discount).
Hire an accountant
If you’re not au fait with computers or just need a human being to lay certain tax rules out in layman’s terms, it may be worth investing in an accountant. Having someone available every month to check your books can be handy. Many will hire an accountant simply to help last minute with their tax return. Before choosing an accountant, look up their background to see what other companies they’ve worked with. Certain accountants and firms may specialise in certain areas such as law or retail and hence be able to give you more specialist advice. You can also pay extra for a chartered accountant that will guarantee you professional service.