As a self-employed freelancer and work from home mum, I’ve had to quickly learn how to keep on top of my home business books. It is one of those important tasks that I used to dread, especially when it came to meeting the tax deadline.
Coming off maternity leave and with two kids keeping me busy, I was determined to be more organised and put better systems in place to make the whole process more efficient and less stressful.
I quickly came to realise that keeping on top of my accounts isn’t all that scary, that I didn’t need to be a maths wiz and that a little bit of planning and organisation helped save a lot of time in the long run.
Whether you’re running your own business, a busy blogger or making a living from freelancing then here are a few ways to help you keep on top of the books.
Open a Business Bank Account
This is the first thing you should do when setting up as a freelancer or starting your business. It is not a legal requirement but it’s a good idea to keep your business and personal accounts separate.
It will help you record business expenses and income which will make filing your self-assessment a lot less taxing. By having a business account, you won’t have to trudge through all your personal transactions should HRMC want to review your accounts.
Know Your Tax and National Insurance Rates
I think one of the worse things to be caught out on as a freelancer or sole trader is a hefty tax bill at the end of the year, especially if you didn’t prepare for it.
To avoid this, be aware of what your income threshold is and the National Insurance Contributions (NICs) you need to pay.
The personal allowance is the amount you are allowed to earn tax-free before you start paying income tax. For 2018/2019 this is £11,850.
A basic tax rate of 20 percent applies to income between £11,850 and £46,350.
Once you start earning above £46,350, your tax rate increases to the higher tax rate of 40 percent.
For those earning £100,000 or more, your personal tax allowance falls by £1 for every £2 you earn over £100,000 which means that if you earn £123,700 or more you won’t get a tax free allowance.
If you earn over £150,000 then an additional tax rate of 45 percent is charged.
Keep Your Receipts
Whether it’s a new planner, a taxi fare or coffee with a client – keep every receipt and store them as you would any for any bigger purchase.
I’m guilty of losing my receipts somewhere in my handbag or stuffing in the pocket of my coat. It’s not exactly a fool-proof system, as proven by me spending the best part of an hour searching for a month-old receipt instead of working on building my business.
Its good practice to keep your receipts stored month-by-month in a folder. You could take photos or your receipts so you always have a digital copy. Some high street retailers also offer to email you a copy which I always accept. Make sure you keep the original receipt as HRMC may still need some in paper form.
If you’re self-employed then bookkeeping need not be a complicated task. Do a little bit every week to make sure your bookkeeping doesn’t evolve into an arduous mountain climb at the end of every financial year.
Some people use an excel spreadsheet to keep on top of what is coming in and going out. If you don’t have time to do this, then there are affordable accountants and bookkeepers who can look after your accounts for you.
Depending on what you need and can afford, professional bookkeepers can offer anything from a couple of hours a week, monthly packages or full-time support.
If you need a bit of help filing your tax return then hiring an accountant can be a valuable investment. They can go through your bank accounts, make sure you are claiming your expenses help save you from paying too much tax. They can also provide business advice and make sure your money is performing well.
How do you keep on top of your books? What systems do you have in place?
This is a sponsored post in collaboration with Braant Accounting
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