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Unbelievably I am doing my tax return at the almost-last-minute AGAIN despite having TEN MONTHS OF NO FUN to distract me, so yet again here is a thread of boring but hopefully helpful advice to any freelancers in the same boat who might be doing their return for the first time:
1) It's not actually as scary or laborious as you assume, as long as you don't have things like foreign investments and numerous properties and you don't run several companies (haaaaaaaaaaaaaaaaa no, they all laughed). You can do it yourself easily.
2) If you are a freelancer in your side hustle, for instance, or you were only freelancing for a few months and you made less than £1000 as a freelancer for the year, you do not have to a file a tax return for this.
3) If you earned £12,500 or under, you will not have to pay any tax (unless you owe tax from a previous year). You will, however, still have to file, and you will have to pay national insurance, which is usually a couple of hundred quid.
4) If your tax bill is over £1000 for the first time, you will have to pay *an additional 50% on top of your bill*. If your tax bill is, for instance, £2000, it will in fact be £3000. This is to cover the first payment for *next* year. NOBODY MENTIONS THIS BEFORE IT HAPPENS.
5) This is a result of the govt shifting you from paying all your tax at once to paying 50% in January and 50% in July. They front-load it, so for one horrible instance, you have to pay 100% for the previous year and 50% for the 'current' year. An unbelievably bullshit system.
6) Your payments on account will assume that what you make in one year will be the same as what you make the next. If you know that you're earning / going to earn less in the 'current' year, you can ask to reduce your payments on account (or increase them if you are earning more)
7) They will ask what you think you'll make in the year 20/21. If COVID has hit you hard, let them know. They will readjust your payments on account. If you end up earning more than you think, you can pay the diff later - though they will charge interest on the difference (twats)
8) Sometimes they will just randomly charge you late payment fees. HMRC is understaffed. It is up to you to keep a check on what they are charging you and query this, because it can add up (to about 400 quid, in my experience). The onus is on you to prove you paid on time.
9) Sometimes when you file your return, you'll log on a week later to pay and find 2 different numbers given for what you owe. Then you ring them and they give you a third, totally different number. Pay the one they say on the phone you & get it in writing to prove what they said
10) There are a lot of things you can claim as expenses. For instance, if you're a writer, your expenses can include books, film tickets, travel to meetings, food for when you're travelling for events, your phone contract, a new laptop, even clothes for events. Research this!
11) If you work from home, you can expense a portion of your heating bills, broadband, even part of your rent. You can do this as a confusing percentage or pay a flat rate. Here is some information on that: https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home
12) You shouldn't need to file the specifics of your tax return, just the big numbers. However, if you're audited, you'll need to have kept ALL YOUR RECEIPTS. I like using @QuickBooks because it lets you take photos of all your receipts and store them, but it's about £10 p/month.
13) If you can have a separate bank account for your 'work'/freelancing stuff, it will be really helpful if you ever get audited. It also helps you keep track of expenses / spending / income if you don't use something like Quickbooks to keep track.
14) The single best thing you can do IMO is to have a separate 'tax to pay' bank account and put 20% of everything you earn in there. There should always be slightly more than you owe. Don't think of it as your money. It's tax you owe.
15) It's actually better to put 30% of everything you earn in there, to cover national insurance, etc, plus it can act as a buffer for any freelancing-related emergencies that come up. However I cannot bring myself to follow this advice. You should tho.
16) If you have been in receipt of SEISS, this will count as income in your 2020-2021 tax return (not the one due this month, the one due Jan 2022 - tho the smart kids (not me) will file that return in late April 2021).
17) It can be overwhelming to do this stuff - but you can ask for help from other freelancers you know. We are conditioned out of talking about money and taxes but knowledge is there for the sharing and even getting advice from a pal can make you feel much better.
18) I usually advocate the Tax Party - getting some friends together and doing your tax return together with food and drinks. Obviously we can't do that now - but you could have friends on zoom so you can all do it at the same time and help each other out. Add booze!
19) Set aside a couple of hours, tackle it head on, stop when it gets too much but don't let it linger: plough through. It's not as hard as you think. Ask for help. Get it out of the way. Treat yourself afterwards.
