So, you’ve made the decision to go freelance. You want control over your own work, a better work/life balance and to maximise earning potential.
Going freelance may be one of the most liberating things you will ever do. However, there could be one area where you still feel the shackles, and that’s managing your finances. Once you become one of the two million freelancers in the UK, managing expenses, filing taxes and saving for retirement will be all down to you.
But don’t let that stop you. Here are five simple ways to find your feet with your freelance finances. This will allow you to focus your energy on what’s most important: nurturing your craft and doing what you love.
Here’s how to get started:
Take control of your tax affairs
While you’re focused on growing your business, don’t lose sight of tax. If you’re just starting out, the first step is making sure you are registered with the HMRC at www.gov.uk. Once you have received your Government Gateway Reference you will be able to send tax returns, check payment due dates and view your account status online. The priority should then be making sure you avoid any surprises when the Self Assessment deadline approaches. You can do this by tracking necessary tax deductions and estimating how much you owe all year round using online accounting software.
Keep on top of your expenses
When it comes to completing your tax return you’ll need accurate records of your expenses which can be tough given most freelancers use a single bank account for everything. Accurate records are essential for lowering your tax bill because without them you’ll struggle to justify claims for tax deductible expenses or you’ll forget to claim them altogether. Our recent research found freelancers spend an average of two hours per week trying to separate their business and personal expenses and an additional 2 days at year end trying to make sure their tax return was accurate. The equivalent of 17 working days a year that you could’ve otherwise put toward your business, or better yet, spent on a holiday!
Put pension funds aside
Fewer than a third of self-employed workers are saving into a private pension. In fact, 15% do not appear to have any retirement savings whatsoever, according to the FSB. It’s never too soon to start putting money aside. Knowing your retirement fund is taken care of will mean there’s one less thing to worry about.
Use tech to keep track
If you’re feel like your paperwork is taking up too much time it may be time to automate it with web and mobile apps. QuickBooks is just one example which helps you keep track of all your income and expenses then organize them into one place. It does this by using feeds from your bank to categorizing your statements into business and personal transactions. Have lots of receipts or a mileage log book? Use your phone to take photos of them and QuickBooks will record them for you and add them to your digital tax return saving you time and making sure you don’t forget to claim it back.
Bring in a trusted advisor
If your finances aren’t straightforward, or you just want to start off on the right foot, working with an accountant could help. They will make sure your tax return is completed properly, and that you claim all the expenses, allowances and tax reliefs available to you. What’s more, accountants can provide valuable advice as you look to grow and expand your business.
While you might just be getting started, it’s always wise to ‘future-proof’ your business for whatever comes your way next. You never know when opportunity will come knocking.
Learn more about what you need to prepare for the Self-Assessment deadline on the 31st of January, and how accounting software can take the stress out of tax-time and give you better control over your finances.