Tax Bill Worries? Online Accounting to the Rescue?

September 4, 2008

A common worry among the freelancers we speak to is whether they’ve got enough put aside for their next tax bill.

Failing to make this kind of provision frequently catches those new to freelancing out. Her Majesty’s Revenue and Customs are not known for their understanding in these matters, with penalties and interest being charged as soon as you miss deadlines.

The rules for working out the tax bill, and when it’s due, vary according to your company structure and can be quite complex. An accountant will take your invoices and receipts and sort this out for you, but it can cost hundreds of pounds and you won’t know what the answer is until after the tax year is finished.

For all freelancers, Self-Assessed income taxes are due by 31st Jan in the year following the end of the tax year (so 31 Jan 09 for the tax year 6 Apr 07 to 5 Apr 08). There will be payments-on-account from the previous year, and those for the next year, to consider when working out what’s actually due.

For those running Limited Companies, Corporation Tax bill deadlines vary according to when your company’s accounting year ends but you have a similar amount of time to pay. And of course there are VAT Returns and Payroll Taxes to keep track of too.

We don’t know anyone who enjoys this, and even with the best will in the world many of us leave these matters to the last minute. A nasty surprise or missed deadlines can be the result.

There’s some good news, though, in the shape of a new breed of online accounting and tax calculation services which can help you understand what’s due and when, well in advance.

One example is Sam’s Tax (www.samstax.co.uk), dealing with Self Assessment for Sole Traders but also able to work out VAT as well. You subscribe to their online service, which costs £9.99 a month (with the option to pay £99.99 annually instead) and enter your income and expense transactions into the system.

It then gives you access to a set of reports and graphs which detail where your money goes, a monthly breakdown of profit, information to fill in VAT returns and of course the numbers you need to complete your Self-Assessment Tax Return.

Also available is the popular service FreeAgent (www.freeagentcentral.com), which is built primarily for freelancers and provides plans to suit Partnerships and Limited Companies as well as Sole Traders.

Like SamsTax, FreeAgent handles Self-Assessment Tax Return figures and VAT Returns, but also handles Corporation Tax and PAYE/NI (payroll) taxes, and provides a ‘Tax Timeline’ – a calendar of tax due dates and amounts that you can view in your Outlook, Apple iCal or Google calendar.

FreeAgent is slightly more expensive at £15 a month for Sole Traders, £20 for Partnerships and £25 for Limited Companies.

Both services offer a 30-day free trial, and FreeAgent also provides access to a number of demonstration accounts so you can try it out without signing up.

We’ve checked out both services, and they both look like they would take a lot of stress and hassle out of managing your money.

Now there are no excuses for not knowing how much you owe and when you owe it. But it’s still up to you to ensure you set that money aside!

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People per Hour are pleased to have negotiated a 10% discount for all our Providers when you sign up to FreeAgent using the the ‘Recommended by PPH’ FreeAgent page. We’re also working to provide you with a fully integrated solution so that all your PPH invoicing is synchronized with the rest of your accounts automatically without having to re-enter data.

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