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When you’re newly self-employed, tax is one of the big unknowns that can send you into a fluster. It’s very normal to put it off but it’s not a great idea.
Leaving your taxes to the last minute means that you’ll end up scraping around to find the dates of your income and expenses – and that can be pretty stressful.
Once you understand a bit more about tax, or you’ve done your tax returns a few times, it can be easy to forget how intimidating it was when you were first confronted by the responsibility. At TaxScouts, we live and breathe tax, so we wanted to chat with someone who was coming at it for the first time this year.
Tide Adesanya – Tea – was that person exactly.
Tea is a freelance content creator, artist, influencer, co-founder and all-round intimidatingly driven twenty-something. This year was the first year that she had to do a tax return. When we first spoke, she told us that she didn’t have too much clarity on what was needed and when.
“The whole tax industry has an intimidating atmosphere.”
And despite the fact that her dad is a certified accountant, the tax space is so vast that she felt a bit lost with the whole process trying to navigate it on her own. Enter TaxScouts. We offered Tea a gifted tax return in return for her honest feedback of her experience. Check out the post if you’re interested in what she thought here.
Following her tax return, we thought it would be good to hear from Tea about what scared her most when it came to doing her taxes for the first time. True to form, she’s created a funky video talking through three big fears and what she did to solve them.
Give it a watch here, and see if you can relate?
Tea isn’t alone. Those are common fears and part of the reason that so many self-employed newbies procrastinate. To add to Tea’s advice, we’re giving you five tips to help anyone else putting off doing their 2020/21 tax return, or even to get you prepped for next year.
Whatever your thoughts on Excel or Google Sheets, they are your friends when it comes to taxes. As we said, you don’t want to get to January and then have to go back over the entire tax year (6th April – 5th April) to find each time you were paid or spent something on your business.
This can cause a lot of stress and you’re more likely to miss something with this method. Instead, you can create a spreadsheet for each tax year, and split into monthly tabs. Have one for your income, one for your expenses. Every time you spend/earn something on your business, put it into the spreadsheet and by the end of the year, you’ll have everything in one place that you can upload yourself or just hand to your accountant.
This makes things even easier. If you open a business account (there are loads of free options) and use it only to spend and earn on your business, this will help you keep your personal and business spending separate. So when it comes to creating your spreadsheets, everything is in one place from the start.
There are various deadlines to get to know in the tax year:
You don’t want to get to January and then be stunned by what you owe in tax. It’s wise to put 20% aside of your earnings as you go, ready for your tax bill.
Take a look at our tax calculator if you want to play around with what you could owe for different earnings.
The real time fear. There is so much confusion surrounding expenses. What can you deduct from your earnings and how do they work in the first place?
Basically, anything that you spend wholly, exclusively and necessarily on your business (e.g. a training course, a laptop, an office chair), you can deduct this from your overall earnings so that you only pay tax on your profits.
Here’s a quick rundown of the things that you can and can’t expense – but if you’re not sure, you can always just get in contact with HMRC and ask.