Freelancers warned against new tax year tactics
Freelancers are being warned to be “careful “with their costs, as the start of the new tax year last Friday – and the end of the previous one -- can cause many to slip into non-compliance.
In fact, if any costs relate to a specific time after April 6th (the 2018/19 tax year), “you’ll have to carry them forward and claim tax relief on them at a later date,” reminds FreeAgent.
This is the case even if those costs were incurred and paid for by freelancers before Friday, when it was the previous 2017/18 tax year, which ended on Thursday April 5th.
Emily Coltman, FreeAgent’s chief accountant explained: “If you're attending a course in October 2018, and you pa[id] for that bill before 5th April 2018 – you'll have to put the cost into the year ended 5th April 2019.
“[That’s] because that's the tax year in which the event will be taking place. It doesn't matter that you actually paid for your ticket in the previous tax year.”
The accountant advised that freelancers “need to be careful” to avoid upsetting HMRC.
She also sounded a warning to any sole trader who tried to use the new tax year to defer income, in a bid to pay tax on it a year later.
“HMRC is wise to this trick,” Coltman cautioned.
“Income must be included in your accounts depending on when you did the work, not when you raised your invoices or when your customers paid you. So asking your customers to defer payment won't work, nor will dating all your invoices as 6th April 2018 instead of 1st April 2018.”