How Do I Manage My Tax as a Freelancer?
Freelancing comes with multiple perks, and one of them is freedom. But, like other things, freelancing also has its pros and cons. Thus, anyone looking to start their career as a freelancer should know what these may be. For example, one of the prime concerns for freelancers is tax management because there is not always a steady flow of income.
But all of your hassle to manage them as a freelancer is drained down with this write-up. Here we have lined some ways to help you manage your freelancer tax related matters. Keep reading for a better comprehension of knowledge.
Keep Important Documents
As a freelancer, when you start with the annual tax returns, ensure that you have the following documents to avoid any hassle.
HMRC’s self-assessment form: It is primarily considered the self employer or freelancer form for individuals earning more than £1,000. HMRC is typically an online way to fill in the freelancer taxes. As soon as you register, it will send you a 10-digit UTR (Unique Taxpayer Reference).
Find Out the Taxable Income
You might have heard earlier that every penny you earn is not taxable. Yes, there is indeed a specific limit until which you get the chance to save your taxes and save money. However, people can even fill their taxes in those conditions, but everyone prefers to save money. If you are working as a freelancer, then filing taxes would be a challenging task for you as you need to change the income reports every year due to fluctuations in work.
Therefore, it would be better to find out the taxable income that can help you to save your precious time and money in the long run. You can contact us at ACE or freelancer tax officer to know about the limits. Here are a few of the expenses that can be deducted from a freelancer’s income:
- An area on rent if you work from home
- A portion of the internet and utilities
- Health Insurance Premiums
- Contributions to the retirement fund
- Phone Call Prices or the Skype Credits
- Software packages
- Payment Management System Fees
- Printers, paper, and ink
- Computer, tablet, or the laptop
- The freelancer commission fee
You can receive your net income once all these deductions have been made from your particular gross income costs. However, when the amount exceeds £1000, you need to pay self-employment or freelancer tax. As a freelancer, you are liable to pay tax after deducting all the allowable business expenses. By the 31st of October of the current year, you should have digitally filed the self-assessment tax return. After that, HMRC will mail you a bill.
It can be a little arduous when managing your finances as a freelancer. With a little effort, you can even tighten your cash flow and remove unnecessary expenses. If you are still sceptical about managing your taxes, then get in touch with our experts at ACE. We can help you with the seamless process of freelancer tax filings and allow you to focus more on your next job.