The perks of being self-employed will always be accompanied by the obligation to do your own accounting and tax returns. Oumesh Sauba, founder and CEO of MyT Limited, offers some advice that can help make handling your taxes less of a burden.
Oumesh Sauba, founder and CEO of MyT Limited
With the cost-of-living crisis continuing to affect households across the UK, alongside the fallout from Liz Truss’s mini-budget, it is easy to see how you may not see much of your money.
The promise of tax cuts may have appeared a good thing when announced, but the reaction and subsequent drop in the pound’s worth means it isn’t a good thing for everyone. Unless you are a high earner, people on lower incomes could actually be worse off in the long term, despite the reduction in National Insurance contributions and the cancellation of next year’s Corporation Tax increase.
Costs are increasing everywhere including energy prices however fuel prices at the pump are starting to come down, albeit slowly. Therefore now is probably the best time to sit down and sort your finances, including putting in place some tax saving initiatives.
Keep records – of everything
Keeping records of all your income and expenditure is bookkeeping 101 however it is easy to lose a receipt here or not charge enough there. It’s worth investing in an accounting app such as MyT where you can upload your expenses easily.
As well as keeping everything online – meaning no more piles of paper lying around the office or house – it is easier to work out your deductible expenses. You can even connect your company bank accounts and cards, ensuring every expense is logged.
Claim your allowable expenses
All self-employed persons are entitled to allowable expenses including clothing expenses, training courses and travel costs. While the total amount allowed is dependent on your income it is important to check what you can and can’t claim for. You can also claim capital allowances – so long as you haven’t used your £1,000 tax-free ‘trading allowance’ – meaning if you have a van specifically for your business you may be entitled to claim this against your tax return.
You can find more information on the HMRC website.
Continue paying into your pension
Studies show that when times are tough many self-employed people stop their pension contributions however, time and again this has shown to be the wrong thing to do.
As tempting as it is, paying into your pension – even at a reduced rate – can provide you not only with a financially secure future, but with tax relief now. Some pensions are specifically set up for automatic tax relief however for those that aren’t there is another way.
When filling out your self-assessment you are required to include the amount you have put into your pension pot over the year. From this you can claim additional tax relief – 20% up to the amount of any income you have paid 40% tax on and 25% up to the amount of any income you have paid 45% tax on.
Remember deadlines
While not a tax saving tip, it is vital that you remember your tax return deadlines as missing them could incur fines. The end goal is to have more money in our pockets so it makes sense to research how you can make this happen. By paying more attention to how you are spending your income you could potentially save yourself money over the year, and in the future too.
About the author
Oumesh Sauba is the founder and CEO of MyT Limited, an award-winning AI-driven accounting app and software designed to support freelancers and micro businesses with their bookkeeping and records. He is also director of his own Croydon-based accounting firm Sauba and Daughters Co, and has over 15 years of experience as a Chartered Management Accountant specialising in financial accounts, management accounts and taxes for small businesses.
