One of the main benefits of working for yourself as a sole trader is the freedom and flexibility that comes with it. The downside – just in case you didn’t know about it already – is that you have to manage your own tax. Generally, your income tax and National Insurance isn’t automatically deducted from each month’s pay once you’re self-employed. You need to fill in a tax return before the end of January each year (or the 31st of October if you file a hard copy), notifying Her Majesty’s Revenue and Customs – more commonly known as HMRC – of your earnings and making the correct tax payment. It can prove a difficult process, and getting it wrong can mean you incur hefty fines. To prevent that, read on and discover a few tips to help you fill out that pesky form and pay your taxes in a way that works for you.
What Can I Claim Back?
Early on, many sole traders are unaware of the specifics of their expenses. Yes, travel and equipment can often be claimed back at the time you file your tax return, but did you know that you can also claim for certain kinds of training and the ongoing costs inherent in developing your skills for your new business? It’s not always the case, but it’s definitely worth doing your research to see whether the course you’re considering might fall into the category of a tax allowable expense.
Also, good news for those who work from home – you can reclaim a certain portion of your utility bills if your gaff is also your office. This is called a “use of home” allowance, and the amount of usage that can be attributed to your work is calculated according to a number of aspects, including the number of rooms in the proper you commonly work from and the cost of your bills in the first place.
When Should My Year End Fall?
While the tax year is generally accepted to finish on 5th April – with many self-employed individuals giving themselves a year end of the 31st of March to ensure their self assessments are completed in time – other people prefer to arrange a wider window to do so. There is a greater amount of flexibility allowed than many realise, however, as you can set your year end pretty much as early as you want, meaning you have plenty of time in which to ensure your tax is paid.