Paul Gough is Managing Director at Intouch Accounting – bringing specialist contractor accounting services to skilled contractors across the UK.
Considering life as a freelancer but concerned about managing your finances? Today, with the help of the expert contractor accountants at Intouch Accounting, we’re bringing you 5 top accounting tips to help you get off on the right financial foot when starting your career as a freelancer.
Do I need to learn how to handle my books?1. Staying organized
Organization is the foundation of accounting best practice. From tracking your business expenses to filing your invoices, keeping thorough and easily accessible proof of your financial transactions is vital – especially when it comes to calculating your taxes.
There’s an array of financial apps and software packages available to freelancers, which can be incredibly useful when it comes to staying organized. From managing finances to generating invoices and tracking your time, finding inspirational financial tips will help you to meticulously manage your career. Alternatively, you can opt for a more traditional method of organization and build your own spreadsheet to track your income and expenditure – updating it as you go.
2. Setting up
Many freelancers start out as Sole Traders, making them the exclusive owner of the business and responsible for all financial gains and losses. However, as business begins to boom, it’s often more profitable to trade as a Limited Company – leaving you with more take home pay while also enjoying the flexibility of being your own boss.
From the outset, organization is key – and keeping your records up-to-date and retaining all receipts will make coordinating your career as a freelancer a breeze.
3. Hiring an accountant
From helping you set up your own Limited Company to providing business and tax advice, an accountant can be an invaluable resource for budding freelancers. As your career takes off, you may find yourself inundated with work offers and subsequently drowning in invoices.
Many successful freelancers employ specialist freelancer accountants to ensure their finances are handled legally and efficiently – providing a useful direct line for advice and ensuring you’re operating as efficiently as possible. After all, one of the primary benefits that come with freelancing is the freedom from financial and time constraints – so outsourcing is often the best way to go!
4) Dealing with taxes
From understanding whether you’re ‘inside’ or ‘outside’ of IR35 to working out your take home pay, getting to grips with the financial side of freelancing is crucial. With the 2015 Budget resulting in some confusing changes to taxation for those in the freelancing sphere, it’s more important than ever to understand the financial side of going solo.
Claiming tax back on your earnings might appear to be a confusing process – so before you wave goodbye to permanent employment, make sure you understand what the taxation laws mean for you. For total peace of mind, speaking to the experts is the best way to go – as professional accountants can help you organize your finances with ease and ensure you’re clued up on all of the essentials.
5) Claiming expenses
The most important thing to remember when it comes to claiming expenses is not to throw anything away. Receipts are the best way of proving where your cash has been spent and, therefore, determining whether you’re eligible to claim it back as a business expense.
When trading as a Limited Company, buying a company car might be the best way to manage your mileage expenses – but remember to take into account Class 1A National Insurance, fuel, road tax and maintenance costs before deciding if this is the best option for you. In many cases, using your own car and working out your own mileage often proves to be the easier and more financially appealing option – so spend some time finding out which option best suits your circumstances.
We hope these actionable accounting tips will help you succeed on your career path as a freelancer.
Have additional tips to share? Please do in the comments below.
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