The tax man comes’a’knocking, every year. Relentless and uncaring. Kind of like the Groke.
It’s pretty boring but vital for every self-employed person to be somewhat aware of what’s required and what’s to come.
I have just a few tips that took me a little while to really work out:
Keep a note of everything
Expenses and income. Don’t do it later, do it now, because you will forget. I have an accounts book which is divided down the middle of each page, the left hand side is expenses and the right hand side is income. There are also apps, and you can also use Excel (or google’s free equivalent)
You can claim the cost of relevant items as a business expense
For example I have to buy art books and comic books. Don’t miss things out, but stay within the law of course. I’ve been told that QuickBooks is useful for tracking expenses.
Keep a note of your work-space expenses
So commuting costs, rent, internet, other work-related bills). It all adds up and means you’re paying slightly less tax, so be sure to make a note of it all, and of course double check what you’re allowed to claim before you fill out that return.
Prepare for payments on account as early as possible
This is a biggie. When I started out my income was low but each year it increased slightly. I was used to just paying tax for what I had earned but then one year I was slapped with payment on account (meaning you pay for the past years’ tax AND you pay half of next years tax at the same time). In theory it means each subsequent payment is lower but initially it means you’re paying something like over 40% of your annual profits to the taxman. Yeah that sucks and it can really catch you off guard. My pro tip would be to keep a float of money set aside just in case this ever happens so that you’re still able to pay rent and eat.
There may come a time when you need an accountant on board to help out
ask your friends and family for any personal recommendations so that you can work with someone you trust and like, it makes the whole process really painless.
That’s pretty much it. As long as you remember that tax is unavoidable (unless you’re amazon or some other conglomerate) but it’s really not that bad. Just do your best to keep on top of it, and don’t be too harsh on yourself if you fall behind for a few days (or weeks), it happens to everyone.