fbpx

​​Taxes: How Exactly Should I Be Going About This?

If you’re fairly new to the freelance game and are aware that we are gracefully and painfully approaching the end of the tax year (April) you may be wondering how best to go about it. 

Essentially, as a freelancer, you are legally obliged to tell HMRC about it if you earned more than £1,000 in the past year from freelance work. You can do so online.

When you register, HMRC will send you a letter with your 10-digit Unique Taxpayer Reference (UTR) and then set up your account for the self-assessment online service. You will also receive a letter within 10 working days (21 days if you are abroad) that contains an activation code. Using this code and the UTR number, you can finish the registration process online, via the HMRC website. You will also be asked for information about your business, such as the trading name and contact details.

Can I apply depreciation to some business expenses?

In short, yes. While HMRC does not allow you to deduct the depreciation of fixed assets from any source of income, businesses can apply specified rates of annual deduction, called capital allowances, to certain asset classes. These include equipment, cars, machinery, and so on. A special regime also applies to intangible assets, such as patent rights, know-how, and trademarks, and goodwill. Read HMRC’s guide for more information. 

What about work from home?

If you use one of the four rooms in your home as an office for a full working week, it’s reasonable to claim 25% of relevant home costs. These would include a proportion of rent or mortgage interest, utilities such as gas, electricity, metered water rates, as well as council tax, insurance, telephone bills, and broadband usage.

How to pay: 

You can pay in several different ways:

What if I miss the deadline?

If you’re not able to pay your tax bill, you can arrange a payment plan with HMRC. This should be done before the bill is due or by 1 April for Self Assessment. Special tax bill considerations have also been made due to the COVID-19 pandemic. You might be able to pay off your tax bill in monthly instalments. Additionally, you may be eligible for an income support grant.

Depending on the circumstances, tax evasion in the UK can result in heavy fines and even jail time. A summary conviction is six months in jail or a fine of up to £5,000. The maximum penalty for income tax evasion in the UK is seven years in prison or an unlimited fine. The maximum sentence for not paying VAT is six months in jail or a fine of up to £20,000.

Get Tax Support! 

Doing taxes is a massive pain. That’s why we partnered with TaxScouts to help you take the weight off with calculating, filing and claiming tax returns. Now you can focus on what matters most, your creative business. 

We also have 10% off for you from our community.

Leave a Reply

Your email address will not be published.

Related Posts