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Imagine the freedom. Waking up whenever you want, having regular breaks with no boss to tell you what to do. Most of us dream of going self-employed, but when the reality sets in, you suddenly realise that just running a successful business isn’t enough! There’s paperwork everywhere, and keeping track of it is no simple task.
This may sound daunting and to be honest, the first few times you think about it, it will be, but don’t worry, help is at hand. There’re loads of large words when it comes to tax and paperwork, and when you first start out, it’s not always easy to remember what to keep or what to chuck away. So here are a few basic tips on how to keep all your paperwork together, ready to file your first return.
The first term you may stumble across is enterprise content management. In layman terms, this is external software you use to keep all your business transactions, documents and communications together, with easy search functions to find what you’re looking for. These are especially useful if you work in a small team, so you don’t overlap.
If you work offline, it may be easier to store paper copies of everything in a box file. Trust me when I say that making sure it is all in date order (oldest at the bottom) is a must, as when it comes to filing your return, there is nothing more annoying than having to rummage through years worth of paper! Every year, buy a new one and keep the old one safe somewhere. You never know when you might have to go back and check over something.
If you’re a freelancer or one man band, then a simple Excel spreadsheet might do, to help you keep track of your ins and outs. If you’re storing digital copies, make sure you remember to think about backups. If you don’t use online cloud storage, a portable hard drive is a great way to back up your documents without relying on a single computer. They are surprisingly cheap!
So What do you Keep?
Probably a bit obvious, but when it comes to filing your tax returns you WILL need:
- Your HMRC UTC number. You can find this on any written document HMRC have sent you, including the reminder letter.
- Anything that relates to all money coming into and out of your business. Think petrol receipts, equipment costs or labor charges. Any extra costs you’ve had to fork out on, like exchange rates or payment fees.
- If you work from home, hook out your electric, phone, internet and heating bills. You can claim off them too!
Pro Tip: Keep everything, at least for a while. According to HMRC, you should keep your records for at least 22 months after the end of the tax year the tax return is for. Example: If you send your 2016/17 tax return online by 31 January 2018, all your records will need to be kept until at least the end of January 2018.
Pro Tip 2: Read this breakdown on taxes for freelancers which also includes tax tips you should know about.
What am I Forgetting?
Nothing I expect. Once you’ve done it once, it should start to get easier and you’ll get used to what you need to keep and what you can chuck away. Don’t forget, that if you have accidentally lost or destroyed any documents, to inform HRMC straight away. they might not care, but if you don’t, you can bet your bottom dollar that that will be the piece of paperwork or invoice they want to see!
If you’re a small to medium sized business, then you may want to look into a workflow management system. Filing yourself shouldn’t be too hard, but this helps keep you on track and guides you through what you might need to file successfully on time.
For all us freelancers out there, a simple checklist would do, that you can use year on year.
When Should I File?
Well, that’s up to you. The tax year ends on the 5th April every year, at which point you have until the 31st January the following year to submit your return. (So if you start your business before the 5th April, you have until the 31st January to submit your first tax return.)
Before you submit anything, have a good look at it and check you’ve included everything and declared your earnings correctly. It’s easy to make a mistake, especially if you’re self-employed, and forgot that you donated to a charity as yourself and not your business, then stupidly declared it! Whoops!
You don’t always need an accountant, but when it comes to the tax threshold, they may be able to suggest a few things to trim it down.
Just remember that the key to all of this is to be organized from the start! Trust me when I say that trying to find your HMRC UTC number on deadline day is NOT fun or trying to sort of your payments invoice without clear receipts is a nightmare. Box files, ring binders, portable hard drives, laptops, and tablets are your friends! Simply; just find a way that works for you!
***Disclosure: This is a sponsored post in collaboration with Maxxvault. All views expressed are our own. Please refer to our Disclosure Statement for further information on disclosure. ***