Tax season is fast approaching, which means that it’s time to start getting serious about tax. If this year is your first time calculating your own tax as a sole trader, it can be somewhat confusing and slightly stressful. I know how you feel – I remember when I first did my taxes and panicked at how stressful the whole situation was. I’ve never used an accountant as I’ve never had enough spare money to do so, which has meant having to deal with my taxes by myself.
While doing your taxes for the first time is stressful and scary, it also teaches you a lot about organisation. The first year I did my taxes I left it until the last minute, and boy did I regret that – getting everything organised was a total nightmare, and then there was the stress of coming up with the money that I owed as part of my self-assessment.
The good news is that I learned my lesson, and since then have become much more organised when it comes to my taxes. Wondering how you can make calculating your taxes as a sole trader easier and less stressful? Well below, I have shared the steps that I swear by for making dealing with taxes as a sole trader easier. (Some of these are things that I have already implemented, others are things that I plan to implement as of 2018.)
Create a Government Gateway account
The first step to getting your taxes in order as a sole trader is to create a Government Gateway account. This is quick and easy, and doesn’t take long. Once you have one of these accounts, the next step is to get to grips with how you submit a tax return and how each tool works. The good news is that as well as having advice on the HMRC website, there are also various guides online. Obviously, as well as being able to submit a tax return online, you can also do it via post, but the deadline for this has already past this year.
Design a spreadsheet for monthly income
Something that I swear by is creating a spreadsheet for your monthly income. I use Google Sheets and have a spreadsheet for each year of accounts, running April to April. I have a row for each month and columns for each way I earn – I am registered as a sole trader with multiple income streams. For instance, as well as earning from my freelance writing business, I also earn from this site and from freelance journalism, so I have a column for each of these and put in the total earned each month overall. I then tot up what I’ve earned overall over a year, and that is my annual income. I try to input these figures on a monthly basis at the end of each month, to make it easier when it comes to filing my tax return.
Did you know that HMRC has a dedicated self-assessment tax support line? You can call this number to discuss any worries or concerns that you have about your tax. You can also use it to ask any questions, such as about the best way to calculate your allowable expenses and things like that.
Pay money into your gateway account each month
As of next year, I plan on paying a set amount of money for my tax bill into my Government Gateway account each month. The site allows you to pay money into it in advance, and then takes your tax bill off of the amount that is in there. This makes paying tax as a sole trader more like how tax is paid as an employee and taken straight out of your pay packed each month. That way, at the end of the year you won’t end up with a huge tax bill to stress over paying.
Utilise online tools
I always find that there are some incredibly useful tax tools online. I like to take advantage of these, to help make the process of submitting my tax return that little bit easier and less stressful. One of my favourite tools is the UK Income Tax Calculator – it is an incredible tool that makes getting an idea of how much tax and national insurance that you need to pay, much easier.