This is #19 of 28 daily prize contests. Read to the end for your chance to win.
No matter what you do in your freelance writing career, you’ll have to face the tax
monster man, right? And it looks pretty complicated, especially if you’re not a big fan of mathematics.
Chris Peden (a CPA and freelance writer) wrote a very helpful post last year about how to keep your financial records for U.S. taxation as a freelance blogger. But I know there are plenty of bloggers in the UK who need to know what’s required of them, too. So I’ve interviewed a UK taxation expert to give us the info we need. 🙂
Rosie Slosek founded One Man Band Accounting to provide tax return help for solopreneurs who want to do their own tax return, and support and coaching for one man band limited companies who want to understand what their legal obligations are.
She talks plain English, explains the jargon you need to know (tax-deductible, anyone?), and she’s always on your side. She also has a great sense of humour, and promotes the use of cake and other incentives to meet your tax and accounting obligations.
Here are Rosie’s top tips for UK freelancers to handle your taxes with confidence and grace (and cake).
Get the Right Freelance Tax Advice
Rosie’s been self-employed for years, so she knows all the worries and problems a freelancer faces when it comes to tax and accounting.
And she understands how hard it can be for a one-person business to find tax information designed for UK freelancers rather than Americans or larger businesses.
I work a lot better from home. The solopreneur/freelancer community is such a lovely group of people, I’ve never had any problems, just support and friendliness. Whether at 3pm or 3am, there’s always someone around. Freelance writers, whether it’s writing copy, digital media, or blogging, are a core part of my clients and who I talk and interact with on a daily basis.
Most of them work from home and while it means you can work in a onesie on a cold afternoon, it can also feel a bit overwhelming not knowing what home expenses you’re allowed to claim. A lot of freelance advice out there is written for contractors, and that’s a whole ‘nother world than the one freelance writers usually have day-to-day. Often a different strategy is needed for agency clients than one man band or micro business clients, making credit control (your chasing-up-and-getting-paid process) a bit tricky.
American-focused advice can be OK for UK freelancers as long as you realise there may be differences. If you’re British, thank HMRC for giving you 9 months to file your tax return and not 3 — yes, really! They also have a state based tax system in the US, which we don’t, and the way we’re taxed is different.
Take general money-related information on its own merits, but stick to UK information for the specifics. The other good news for UK freelancers is that HMRC uses more plain English and less jargon than the IRS, at least compared to when I lived State-side a few years ago!
Don’t Fear Your Money
Giving back to her “tribe” is important to Rosie. She wanted to serve the people she knows, likes and trusts. And she’s driven by a desire to make business easier for people who find taxation kinda scary.
I’m big fan of financial literacy (which means knowing what you’re doing with your money and doing what you want with it). Accounting is at the core of that. Not so much the lots of jargon kind, but the real life kind, when you know you can pay your bills for the next 6 months, what your cash flow is, how you’ll pay for things when you retire. And not having the awful stress of not being able to pay essential bills or panicking because your biggest client won’t pay you and you can’t feed your children.
Accounting for one man bands means all that. So many people are scared of numbers, feel they are bad at them, are scared of the tax system (they have a point!), and so they don’t get to grips with their money. I want to change that, both for business money and how my sole trader or one man band director clients manage personal money. It’s very practical and once someone really feels in charge of their money and gets to grips with it, they’re like a whole different person!
First Steps for UK Freelancers
This is Rosie’s nice-and-simple checklist of your first few steps as a new freelance business in the UK:
- Register as self-employed with HMRC and check they’ve registered you for National Insurance Class 2 and Self Assessment Online.
- Keep everything, all the records you have, including paperwork for items you already owned but use in your business (e.g. your laptop).
- Write a list of rewards to keep you doing rather than procrastinating, right from the start
- If you’re going to be a sole trader, a spreadsheet is fine for keeping your records (check out Free Online Bookkeeping With Google Drive). If you’re a director of a limited company, you need accounting software and an accountant (do not do your own accounts as a limited company). If you aren’t sure what the difference is, there’s a blog post about it on my website. Your legal structure has more implications than you might think, so it’s worth spending time getting this right (and money to talk through the options if you’re at all uncertain).
- I’m going to assume you want to DIY. A virtual assistant can be handy for data entry of expenses (it can be very boring) and a resource such as my [#selfpromotionalert] Tax Return Toolkit is a great idea. It gives you structure with the paperwork, helps with what you can claim and can’t claim, tells you what records you need to keep, and has a big sense of humour and mentions cake a lot. You can always get email support if you need more individual help.
- Resources, resources, resources! There are a lot out there, ask around, get familiar. A lot of the overwhelm comes from it all being so new, so a bit of reading can go a long way.
- Rewards. Really important, so I’ll mention that again. I have a Pinterest board called Cake & Brownies! if anyone’s interested.
Know Your Rights (and Wrongs)
One of the big misconceptions people have about self-employment is that you can somehow “claim back” your expenses from HMRC. Allowable expenses are tax-deductible, so you don’t have to pay tax on the income you put back into your business, but sadly HMRC does not give you a refund of your business expenses!
Rosie gave me some guidelines about allowable expenses for a UK freelance blogger.
In general, and this is not cut-and-dried, these are all allowable:
- working from home expenses (if you do work from home)
- outsourcing costs (that virtual assistant for example)
- professional fees
- direct costs (e.g. paper and pens if you write long hand)
- web hosting
- bank charges if you have a separate business bank account.
What you can’t claim:
- food and drink (food and drink that’s allowed has specific rules and is called subsistence)
- clothing (unless it’s health and safety clothing — unlikely for a freelance writer)
- holiday costs
- anything for personal use
Don’t Freak Out
Rosie knows that figuring out your tax is taxing, whatever that advertising campaign tells you.
Overwhelm is normal. Procrastination is a stealer of time spent making more money. Once you’re familiar with it and you know the pitfalls, when you’ll need professional help (for example an accountant, tax advisor, IFA etc.) and when it’s fine to DIY, then it’s not bad at all. Honest!
The second most important thing is that it’s not just about your freelancing. It’s about all your income and bits you probably never thought about before, like capital gains tax and inheritance tax and all that jazz. (If you want to familiarise yourself a bit more there’s a free download here to help.)
Win a Tax Return Toolkit
Today’s prize is Rosie Slosek’s Tax Return Toolkit, which normally costs £24.97
For your chance to win, do both these things:
1. Tweet the following message [click to tweet it now]:
“WIN a UK self assessment tax return toolkit: http://beafreelanceblogger.com/tax-self-assessment-uk via @1ManBandAccts and @sophielizard #bafb”
2. Leave a comment and tell Rosie what you need to know about your taxes and accounts. She plans to release more information products for UK solopreneurs this year, and gave me this message for you:
I’d love to hear from both established freelancers and new freelancers (and people who want to go freelance!) about what concerns you, makes you fearful, gets you overwhelmed, what topics you want to be covered in more detail, what formats would help. My ideal is to make available what will help you, the freelance writing community, most. Business money, savings, cash flow, getting paid! Email me, tweet me, Facebook me, let me know!
I’ll choose one winner at the end of January 9th. Everyone else who enters will get a discount code so you can grab the Tax Return Toolkit at a special low price. 🙂