It’s Tax season for freelancers – How To Tackle Your Tax Returns and Maximise Deductions

Tax season for freelancers… the highs and lows📈📉

Most freelancers we talk to absolutely dread tax season but feel a huge sense of accomplishment when it’s done 🍾

One thing is absolutely certain though – ignoring it is not an option, especially with the looming 31st January self-assessment deadline.

In this post, we’ll guide you through what you need to know to stay compliant, maximise your deductions, and keep stress levels to a minimum 😉

Do you need to file a Self-Assessment Tax Return?

First things first, are you even required to file a self-assessment tax return?

If you’re a freelancer, contractor, or sole trader earning over £1,000 in untaxed income, the answer is almost certainly yes.

If you’re not sure, you can double-check your status using HMRC’s self-assessment eligibility checker.

What happens if I miss the January 31st filing deadline?

Don’t do it – there’s really no excuse for filing late!

You have from the 6th of April until the following 31st January to prepare and file your tax return, so in good old Nike terminology – JDI!! (Just do it!)✔️

Missing the deadline results in an instant £100 fine, with additional daily charges if the delay drags on, as well as interest being calculated daily and charged on any liability not paid over to HMRC by the same deadline.

And remember that if you are registered for self assessment, you still need to file your tax return even if you have not traded or have no liability!!!

So, mark that 31st January date in your calendar📆 (but please don’t leave it that late!🙏🏽)

What are the most common freelancer tax deductions or expenses?

Probably our most frequently asked question!!

You can reduce your tax bill by claiming legitimate business expenses. But what qualifies as legitimate? The key HMRC terminology is ‘wholly and exclusively’ for business use.  See our other articles about Business Gifts and Personal Brands for more on this.

From home office costs to travel, here are some common deductions:

  • Office expenses: Think laptops, stationery, or even a portion of your utility bills, so long as you meet the qualifying criteria.
  • Professional fees: Software subscriptions and even accountancy services (hint: we can help! 😉)
  • Travel: Business-related mileage, public transport, or overnight stays.

Remember, you’ll need to keep accurate records, like receipts and invoices, to back up these claims.

If you’re not sure what qualifies, check out our Accountants for Freelancers pages for more up to date resources and advice, or drop us a line and we will be happy to help😊

How do you keep accurate financial records?

Good record-keeping is the backbone of a stress-free tax return. Here’s what to track:

  1. Invoices: Keep digital or hard copies.
  2. Receipts: Take a photo and store it in an app for easy access.
  3. Bank statements: Consider a separate business account for clarity if you are operating as a sole trader. If you’re freelancing through a limited company then it is a legal requirement to have a separate bank account – just remember not to use it as your personal account as that makes record keeping really messy and complex, which in turn will increase your fees!!

Using cloud-based tools like Xero, FreeAgent or Quickbooks (we like Xero best!) in conjunction with the likes of Dext for scanning receipts and invoices can make this process painless.

Regularly updating your records is far easier than scrambling at the last minute, and as MTD (Making Tax Digital) legislation rolls out beyond VAT registered companies will become essential for all but the smallest of businesses!

How to avoid errors on your Self-Assessment Tax Return

Even small mistakes can cost you.

Whether it’s underreporting income or forgetting a deduction, errors lead to penalties.

Double-check your figures and ensure you’ve included all sources of income.

This is where both the software mentioned above and keeping your accounts up to date in real time really will make a positive difference, and cause a lot less stress in the long run!

Feeling unsure? This is where working with a tax accountant can make all the difference.

You’ll save time, reduce errors, and often find deductions you might have missed.

For more guidance, explore our freelancing resources.

What is Making Tax Digital (MTD), and how does it impact freelancers?

MTD is HMRC’s push to digitise the tax system.

For freelancers, this means using compatible software to record income and expenses and submit returns.

While it’s already in place for VAT, MTD for Income Tax will affect more of us very soon – you can read more about MTD for ITSA (Income Tax Self Assessment) in our article on this topic here: MTD for ITSA.

If this sounds daunting, don’t worry! Our team at IN-Accountancy can help you transition seamlessly.

What to do if you can’t pay your tax bill in full?

If you can’t pay your tax bill by 31st January, firstly don’t panic!!

HMRC’s Time to Pay arrangements might be an option. This allows you to spread payments over a manageable period.

Crucially, even if you can’t pay, file your return on time to avoid extra penalties. Then, contact HMRC to discuss repayment options.

Ready to Tackle Your Tax Return?

With the 31st January deadline fast approaching, now’s the time to take action. Well actually, it’s not – the time to take action was at least six months ago, but if you haven’t yet, then delay no further!!

And maybe even get a head start on next year while you’re at it? Now there’s a novel idea😉

Whether you need help filing your return, understanding deductions, or staying compliant with MTD, IN-Accountancy is here to make the process stress-free😇

👉 Get IN touch today and let us handle the numbers, so you can focus on what you do best—running your business!

Filing your tax return doesn’t have to be stressful. With a bit of organisation and the right support, you’ll not only meet your obligations but also keep more of your hard-earned income. Ready to make tax season a breeze? Contact us today!

🌟 Explore our freelancing guides for more tips and advice.

Here’s an old but still relevant video on what exactly you need to do to get ready to complete and file your self assessment tax return:

 

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