Freelancers and the Self-Employed: Do You Need an Accountant?
Author: Russell SmithSeptember 28, 2016
Being self-employed can unlock a level of work satisfaction you never thought possible. Many people thrive with their newfound independence and go on to be massively successful.
But the lives of the self-employed aren’t always plain sailing. There’s no guaranteed income and no paid sick days. On top of that, there’s no one else around to take care of the boring financial stuff. Or is there?
If you’ve turned down the stability of full-time employment in favour of going it alone, there’s a lot you’ll need to learn about finances to help balance the books and avoid getting heavy tax bills. The simple solution is to hire an accountant to take care of that for you. They are, after all, the experts.
Let’s take a look through some of the things an accountant could do for you, and find out how you could benefit from some assistance.
Accountants Make the Most of Your Money
Perhaps the biggest concern for those who set out on their own is financial stability. Every penny earned becomes far more significant than before, so it’s vital to keep track of money coming in and going out.
The government offers special tax allowances for the self-employed, and the right accountant will take advantage of these for you.
Plus, if you work from home, an accountant will help you reclaim some of the costs incurred there. Your utility bills, Council Tax and rent are all expenses which can be partially reclaimed. For example, if your home has five rooms and you work out of one of them, your accountant could help you claim back a fifth of those running costs. Possibilities such as this make hiring an accountant a straightforward decision.
Accountants Save You Time
One of the main reasons people go self-employed is to spend more time doing the things they love. In some cases, though, the reality can become quite different. Self-employed tax returns and other complicated forms can become overwhelming for those without financial experience. As a self-employed musician, for example, you wouldn’t want to let admin take over your life and stifle your creativity.
The end of the financial year and the deadline for tax returns are two periods when admin will take priority. Hiring an accountant will ease the burden, ensuring you can continue to create and thrive all year long.
Tax Returns for the Self-Employed
Perhaps the most daunting aspect of self-employed life, tax return time is stressful for anyone who works for themselves, and getting it wrong can be costly.
As a sole trader, you’ll have to fill out a self-assessment tax return so HMRC can judge how much tax you need to pay. The deadline for your tax return is 31st January if you file online. If this is your first self-employed tax return, allow for an extra ten days as you need to register first.
Submit your tax returns a day late and you’ll be faced with a £100 fine. If you are judged to have filled in your returns carelessly or deliberately underestimated your tax, you could be fined up to 100% on top of the tax you owe. An accountant will ensure that your forms are filled in carefully and accurately.
One of the perks of being self-employed is being able to deduct company expenses from what gets taxed. So what would a musician’s tax return look like? Well, let’s say you earn £25,000 in your first year as a musician. Great! If you spent £5,000 on work-related travel, instrument repairs and printing flyers for your gigs, you’d only have to pay income tax on £20,000. This is your taxable profit.
An accountant will help you identify what is a business expense and what is a personal expense — or what is tax-deductible and what is not.
Accountants Help you to Grow
An experienced accountant will have helped hundreds of people just like you, from freelance photographers to self-employed shop owners. As a result, they know what it takes to succeed and the mistakes to avoid.
Russell Smith Chartered Accountants has worked with photographers, musicians and numerous other self-employed individuals. For over ten years, we have helped them get the most of their money and advised them on all aspects of self-employment. We know what’s required for these people to succeed in their line of work because we’ve seen what works and what doesn’t.