Tax return hell

It’s that time of year again. Nope, not the time when you have to battle through those resolutions and suffer the horrors of the gym only to find yourself weeping into the biscuit tin by the weekend, but the even more terrifying thought of tax return season. Freelancers, if you haven’t done yours yet you’re RUNNING OUT OF TIME! You’ve only got until January 31^st to file your return and pay any money you owe (incidentally, I find it highly unfair that they make the deadline 31^st January—if the good ‘ol January Blues weren’t already getting you down then the thought of the tax man taking all your hard-earned cash certainly will) or you could find yourself subject to fines and interest penalties. As if they don’t take enough of our money already…

I hate tax returns with a passion. It’s the only part of the freelancing life that I really dislike—it’s so much harder to actually hand over physical money instead of just seeing an intangible amount written on a payslip—but it doesn’t mean I can’t impart some (barely) useful information if you’re new to the whole thing. So, here are a few top tips to help see you through without having a nervous breakdown in the process:

• Register early. Never leave it until the last minute because you can’t just head online and instantly file your return—if you haven’t already registered for self-assessment it’ll take a good week for your registration details to arrive in the post, and then you’ll need to leave around 4 working days for any payments to clear (unlike most of the developed world, HMRC hasn’t yet discovered the delights of instant payment processing). Really, you need to get a shift on.
• Be prepared. Know what you’ll be letting yourself in for and do your research to make sure you don’t get any nasty surprises, because going into the minefield without knowing what you’re doing can be even more stress-inducing than it needs to be. Check out hmrc.gov.uk to familiarise yourself with the process and read any guides you need to, and pay particular attention to something called payment on account…
• Payment on account—the most ridiculous thing ever. I can’t explain it in any great detail but it basically means you have to make two payments to cover your current year’s tax, the first one being due before you actually fill in your tax return for that year. It’s worked out according to your previous year’s tax return which doesn’t make the slightest bit of sense (why work on old figures when you have no idea what you’ll actually earn by the end of the year? Madness) but hey, that’s the government for you. Like I said—read up on it so you don’t get a surprise, because if it’s your first tax return you’ll have to pay that payment on account ON TOP OF your current liability, and that can be a big shock if you’re not ready for it (does any of that make sense? Probably not. RESEARCH!).
• Keep accurate records. Keeping records of all income, invoices, receipts and expenses should of course be a central part of business management, but if you’re a bit lax make sure to step it up a notch. This is particularly the case with the new rules set to arrive later this year—I don’t know the ins and outs as yet but as I understand it, small businesses could be fined up to £3000 if they fail to show the necessary paperwork when required (what did I say about them already taking enough of our money? Insert here).
• Go on a course. As Stacey reminded me in the comments below (thanks!), the HMRC run free courses on expenses, self-assessment and other self-employment related issues and can be invaluable when you’re starting out. Get in touch with your local tax office or business advice centre to see when they’re running near you.

What more can I say? Good luck. You’ll need it. And if all else fails, have a stiff drink—I certainly will be *glug*

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