A new freelancer's guide to self-assessment

If this is the first year you’ll have to file a self-assessment tax return -- or even if it's not -- it must be with HMRC by January 31st, writes Emily Coltman, chief accountant at online accounting specialist FreeAgent.

Are you registered with HMRC?

Firstly, you need to make sure that HM Revenue & Customs are expecting a tax return from you with self-employment pages.

Also, the deadline to file your tax return on paper has now passed, so you must now file your tax return online.

Make sure that you have registered your business with HMRC. Do this in good time, because HMRC needs to send you an activation code by post and it wouldn’t be ideal for this to get caught up in the Christmas post!

What will your year-end date be?

All businesses must prepare the accounts to a particular date every year. This is called your year end date.

The simplest year end date to have in the UK is one that matches the tax year, which runs to April 5th each year. By concession, HMRC treat accounts that end on March 31st or any of the first five days in April, as matching the tax year.

You can choose whatever year-end date you like, but a year end date that doesn’t match the tax year can result in you paying tax twice on the same profits in the early years of your business - though in later years it means you may pay tax later than otherwise.

Also, in your first year of business, you would have to report on your tax return your profit figure for when you started your business to April 5th 2013, even if April 5th 2013 was not your year end (unless your year end is March 31st or April 1st- 4th, in which case you can use your year-end).

Personally, I recommend you stick to the tax year end - it’s much easier!

Don’t miss anything out when you draw up your accounts

You need to take into account all the transactions your business has had in the year. So if you started your business on May 5th 2012, and you choose a tax year end for your business, you need to include in your accounts all the transactions that happened between May 5th 2012 and April 5th 2013.

Don’t forget to include the following:

- Income that you had invoiced, or for which you’d done the work, before April 5th 2013, but which your customers did not pay you for until after that date.

- All your business costs, including those you paid for yourself rather than from the business’s bank account, and including any business costs that you incurred before the business started to trade, so long as you spent the money no more than 7 years before the start of your business and the cost could have been included if you had incurred it after the start of your business. So for example, you can include the cost of buying accounting software before you made your first sale, but not the cost of online gaming software (unless your business is in that industry).

- Any large pieces of equipment ( capital assets) that you bought for your business. These don’t go in as day-to-day running costs but you may be able to claim capital allowances on them.

  Don’t forget other sources of income

You may have income from other sources as well as your business. For example, if you have a job as well as being self-employed, you rent out a property, or you earn interest on a bank account.

Collect the paperwork for this income, such as your forms P60 and P11D from your employer, or bank interest certificates.

Remember you need the paperwork that relates to the tax year 2012/13, the tax year which ended on April 5th 2013.

If you want an accountant - find one now

If you want an accountant to help you to prepare your tax return, now is the time to find one. However, be aware that some accountants may charge an extra premium to new clients who join them in the busy season. But if you are at all worried about preparing your own tax return, do consult an accountant for help.


17th December 2013

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