Running a small business can accrue many expenses, but with financial planning you can ensure you are saving as much money as possible while still doing your due diligence.
Tax requirements for freelancers and self-employed
If you are self-employed business owner and have earned more than £1,000 in the previous year, you must submit an annual tax return. This involves declaring any payments made to you as untaxed income through HMRC’s online self-assessment system.
Depending on your profits, you may have to pay income tax and national insurance contributions. Your tax rates will depend on the industry you operate within. You will not be required to pay corporation tax if you are a sole trader.
If you have a total taxable turnover of £90,000 or more, you are required to register for VAT. VAT returns are due every three months. If you are selling assets over £3,000, you may also be required to pay capital gains tax.
UK tax planning tips
Even if you do not meet the threshold for registering for VAT, it can be a good idea to register anyway. Once you are registered, you can reclaim VAT on company purchases, which can help you save money.
To gain tax relief you can invest in a pension. Not only does this help you to prepare for retirement, but it reduces your taxable income. It is important to note that money invested in a pension cannot be accessed until you reach retirement age. A Standard ISA also allows you to save up to £20,000 tax-free each tax year.
You should deduct business expenses when filing your income and expenses, as you will be required to pay less tax. Also, if there are any tax reliefs you qualify for, make sure you claim these.
Ensure that you pay your taxes correctly and on time. HMRC undertakes random tax compliance checks, so cutting corners to save money can often lead to you paying significantly more if you are investigated.
At J Sweeney, we have expert tax advisors to help you financially plan and save money on your taxes. To learn more, get in touch by calling 01604 950034 or emailing [email protected].
