Taxes are the bane of many of our lives, but luckily when a lot of us are working for a company we don’t have to think about tax on our own and it is all done for us. If in 2021 you have decided to work freelance or to start working for yourself after the pandemic, it is a good time to learn how to do your own tax returns and understand the tax process properly.
When dealing with clients every day rather than a company, you will need to manage your own taxes and this can be a challenge for beginners. Today we want to share just a few tips to help you understand how to fill out your self assessment tax and keep track of your income.
Keep hold of invoices
The first thing you have to do as someone who is self-employed is to keep hold of your invoices and ensure that they are documented. You need to keep a record of what you earn every month of the year and be able to accurately share this with your tax service at the end of the year. Be sure to keep track of everything – creating a spreadsheet can be a helpful way to do this by adding a list of your invoice amounts along with an accumulative total at the bottom.
Track your spending
It is important as a small business to keep track of your expenses as well as your incoming because this factors into your budget. You have to ensure when filling out your tax return that you add your spending as well as your earnings because this will leave you with your overall profits which is what will be taxed as your wage. If you don’t share your spending as well as your earnings you might end up paying more than you need to.
Save as you go
It is so important as a newbie to self employment to save your tax as you go and put this into a separate bank account. The reason you should do this is because it will be all too easy for you to spend your tax money throughout the year and this will leave you short when the time comes to pay. Be sure to save as you go with a predicted amount and you can be sure you’ll never be left in the lurch.
Account for multiple jobs
There are a lot of confusing parts to tax returns; from form 3922, to NI, to deductions and exemptions and it can become a little too much to take. If you have had more than one job during your first tax year and you want to calculate your tax return – you need to track these separately and log them as separate entities. If you were in employment with a company who paid tax for you during part of the year you still need to add this to your form because the tax service will take this into account for you. Tax can be confusing but you need to add all of the information you can.