A few things to consider when converting to freelance work.
Now that you’re self-employed it’s time to take responsibility for your own taxes. The general rule of thumb is that freelancers will be paid gross before tax. Like everyone else, the self-employed, such as freelance workers, have to pay income tax and national insurance.
To limit any nasty surprises, incorporate a tax budget into your books. Stash this money separately so that when it comes to tax time you are prepared to hand over the money. If you are unsure of what taxes you have to pay and how much you owe HMRC, speak to a financial advisor in Milton Keynes and they will be able to calculate your income tax bill depending on the amount of money made over the year.
It’s not always going to be plain sailing when working freelance, often you will find that there isn’t a steady stream of work. One month, you could be overwhelmed with the amount of projects to complete, the next month you will have no work at all. This is when you really have to be money savvy. When you do have work or projects, put a percentage of that money you’re making aside for a rainy day. When it does come to a slow period, you will still have enough money to pay the bills.
As a freelancer, it’s your duty to keep on top of your invoices, making sure that everyone gets paid the right amount within the agreed time frame. However, what happens if you aren’t getting paid?
With any client, set reasonable terms, such as a 28-day time frame. Make it easy for them to pay you, such as an online payment option. If they don’t pay you within the agreed time, chase them up with a phone call or a polite email reminder. If all else fails, speak to a solicitor and ask them to send a Letter Before Action (LBA).
Freelance workers don’t have the luxury of statutory sick pay. However, if you are self-employed and you do fall ill, you may be eligible for Employment and Support Allowance (ESA). Here you can receive financial support of up to £102.15 a week, giving you one less thing to think about.
Every aspect of your finances should be written down on a spreadsheet. This comes as no obvious surprise, but it is easy to let it slip. Dedicate an afternoon a week to your bookkeeping to keep on top of your incomings and outgoings. There are several reasons for this, with perhaps the most important being the fact that the taxman likes to know how much you are making and spending each year. If you are not on top of your bookkeeping, this could lead to a tax investigation.
Keep your receipts. Things that you buy for your business can be eligible for a tax reduction. This can be anything from a new desk for your office to fuel in your car.
If you are self-employed and you would like to receive professional advice on taxes and bookkeeping, speak to an expert and contact Aston Black today.