The FreeAgent Blog
Posted on 12 October 2017 by Emily Coltman - Jump to comments
Shorter days, Halloween decorations on sale, pumpkin spice infiltrating high street coffee shops - there’s no doubt that autumn is upon us.
As momentum ramps up again after the slower summer period, the autumn months are the ideal time to take a good look at your business and start preparing it for seeing out 2017 in great shape. Emily Coltman FCA, FreeAgent’s chief accountant, gives her top tips for getting your books in order and making life easier in the chilly months ahead.
Check your cash
Do you know exactly how much your business has earned or how much cash it has on hand? If your business’s cash flow is poor then you could be heading for tricky times this winter, so it’s important to make sure that you know how much cash your business has in its bank account.
If you’re not already doing so, check whether you can set up an automatic feed in FreeAgent to pull this data from your bank straight into your accounting software in order to minimise data entry errors. Then make sure you check at least weekly, if not daily, to make sure that your bank balance is correct in your accounts and that all your transactions have been recorded.
Remember if your bank balance in your accounts doesn’t match what’s in your bank, you’ll have to look back and find the difference - it won’t go away!
Send out your invoices
If your business issues invoices to customers, take advantage of any downtime you have to check through your records and make sure you’ve sent invoices for all the work you have done to date. Your customers can’t pay you if you don’t invoice them!
You should also check your list of open invoices - because sometimes there might be some invoices that haven’t been paid because the customer’s just forgotten about them and you haven’t followed them up. There may also be old invoices in your accounts that haven’t been paid and won’t be, perhaps because your customer’s gone out of business.
Take some time now to write off any invoices that you’re sure will never be paid, and to chase up those customers who haven’t paid yet.
Round up your out-of-pocket expenses...
Out-of-pocket expenses are business costs that you paid for personally, for example if you went to the post office and bought a book of stamps to send business letters, but paid with your own cash. As long as these are bona fide business costs, you can put these into your business accounts too, and they reduce the amount of profit you pay tax on, so it’s worthwhile keeping track of all of them!
Go through your wallet and look for stray receipts and make sure that you’ve included any of them which are business costs in your accounts. If you use FreeAgent then snap them using your smartphone and they’ll be uploaded to your accounts immediately - then you can throw the paper receipts away!
...and review how your costs are categorised
When you’re putting your business costs into your accounts - whether they were paid for from your business bank account or whether you paid for them personally - make sure that the costs are in the right categories. For example, a pack of envelopes would be best categorised as ‘Stationery’, while a bill from your office landlord would be ‘Rent’. This helps you make sure that you’re claiming the right amount of tax relief on your costs, and means you can track where you’re spending money in your business.
Be aware of the categories that contain potential tax pitfalls (for example, sundries, subscriptions and lease payments) and make sure that any costs you put in these categories are correct. If you have any doubts, consult an accountant who should be able to advise you.
Keep an eye on when your tax is due
If your business is a limited company, it will be due to pay corporation tax nine months and one day after its year end. If you’re a sole trader, you can expect to be paying income tax and NI at the end of January. And whatever your business type, if it’s registered for VAT, then there will often be a VAT bill to pay every three months.
Make sure you know how much tax you’re due to pay soon, and have money put aside to pay for it. It’s also a good idea to set up a system where you keep a running total of all the tax you owe and align this with your calendar so you know exactly when you have to pay it (or use FreeAgent’s Tax Timeline feature, which gives you live updates of your tax position and deadlines).
Look to the future
Take some time during the early autumn months to consider how your business will deal with the rest of the year. Christmas, in particular, can be a potential bonanza for many businesses, so what will it do for yours?
Will you offer special products, services or discounts at Christmas? If so, could you pair up with another local business who serves the same customers as you do, to offer a joint Christmas package? For example, if you are a children’s party planner, could you find a local caterer, entertainer (magician, balloon modeller, clown) to team up with for special Christmas events? If so, this could provide a welcome boost to both of your businesses.
Posted on 5 October 2017 by Emily Coltman - Jump to comments
Although MTD for Income Tax won’t come in until at least 2020, the government has already put together its suggested next steps for Making Tax Digital for Income Tax. If you’re a sole trader preparing accounts and filing to HMRC, here’s a brief summary of what you’ll be required to do when MTD comes into effect:
- Record each of your business’s transactions - invoices, bills, out-of-pocket expenses, and money in and out - in functional MTD-compatible software. Each quarter, sum these transactions up by category (using the categories currently displayed on the short form of the self-employment pages of your tax return) and submit the information digitally to HMRC.
- If your business’s annual sales are under the VAT threshold, report just your total sales - minus your total allowable expenses - for that quarter.
- If you make a mistake in one quarter, correct it in the following quarter.
- Make a digital ‘end of period submission’ at the end of the accounting year and include any additional information, such as adjustments your accountant has asked you to make or claims for capital allowances for the year.
- Declare in the end of period submission that the figures you’ve filed for that year are accurate to the best of your knowledge and belief.
And here’s what you won’t be required to do under MTD:
- You won’t have to keep a digital copy of each receipt for every one of your business’s transactions. You must still keep the receipts but these can be on paper; they don’t have to be digital.
- You won’t have to take part in MTD for Income Tax if your business’s sales for the tax year two years prior to the tax year in question are under the minimum threshold for participation (HMRC has yet to specify what this will be, but has previously suggested a threshold of £10,000 annual turnover).
That’s what the future for Income Tax under MTD looks like at the moment. Bear in mind that these are still proposals and are subject to change, so we’ll keep you up to date on all the latest developments. MTD for Income Tax won’t become compulsory until April 2020 at the earliest so you’ll have plenty of time to get your digital record-keeping systems ready.
Find out more about how the new era of digital tax will affect your business with our handy MTD guides and resources.
Posted on 2 October 2017 by Fiona Hendrie - Jump to comments
If you’re not familiar with the concept, hack days are when everyone in a tech company takes a short break from their usual schedule to work together on exciting, ad hoc projects that they’re passionate about. At FreeAgent we have hack days twice a year, as they’re a great opportunity for the team to work with people they might not normally work with, on fun, creative projects.
This year we had a record number of projects - 34! Everyone from engineering, design, product management, business development, support, people ops and comms, banded together to form highly skilled hack teams.
With projects ranging from Bitcoin support, to a ‘Weakest Link’ style product training quiz, it’s safe to say that all of the projects were pretty impressive, but only three could scoop the coveted prizes on offer.
Founder’s Award 🏅 Scott & Marcus - rebrand
Two of our super talented Comms Designers Scott and Marcus teamed up to play around with FreeAgent’s branding. They experimented with evolving our current logo by using shapes inspired by data and charts. For just two days of work, it’s pretty impressive stuff! Now that they’ve done this early exploratory work, we have some great ideas for a potential new lick of paint in the future.
Best Presentation 🏆 Hayden & Andy - chatbot
This “best presentation” prize-winner featured a pretty hot topic - using machine learning to create a FreeAgent chatbot!
Software Engineer Hayden and UX Designer Andy teamed up to create a FreeAgent virtual assistant, to experiment with how our users might interact with the FreeAgent app through voice or instant messaging. Hayden used a third party API to assist with phrase recognition, and Andy undertook user research on Twitter.
Following this feedback, Andy defined three basic categories of interaction: basic (“What’s my bank balance?”) report (aggregating data) and above & beyond (“Has Laura paid her latest invoice?”). They also had fun with different tones of voice - how could they make FreeAgent sound fiscally authoritative, yet playful and friendly? Who knows, you might find a spookily sentient FreeAgent bot giving YOU financial advice one day soon...
People’s Choice Award 🏅 Adrian, Tom, Karen, Aleks & Victoria - late payments video
Last but not least came the coveted People's Choice Award (measured by a very scientific applause-o-meter, if you must know). Adrian, Tom, Karen, Aleks and Victoria brought their blend of comms and design expertise together to create this fantastically funny video about late paying clients. They used some recently acquired stats around the toxic late payment culture that’s currently affecting freelancers. In only two days, they drafted a script, sourced images, a soundtrack, a voiceover artist (that might have been Adrian…) and edited the whole lot together - pretty impressive!
They’re currently hard at work putting the finishing touches to this hastily assembled project - so keep your eyes peeled on social media for this wartime-inspired (future) classic.
That’s a wrap! 🗞
Now - this might not strictly be a hack days project - but myself, Alex and Rory found that our original hack days projects wrapped up much sooner than we had planned. After some quick thinking, we decided to use the skills we had learnt in our video training workshop with the marvellous Erin Maguire the previous week. In the time we had left we shot and edited a short film, trying to get across the spirit of the office here at FreeAgent, and how much fun both hack days, and working here in general, are!
Posted on 20 July 2017 by Adrian Mather - Jump to comments
There are a lot of perks to being self-employed, from flexible hours and being your own boss, to the privilege of working from home in your pants. There are definitely some drawbacks to freelance life though, and one of these can be the annual filing of the Self Assessment tax return.
Unless numbers are your jam, chances are that bookkeeping is not the highlight of your working week (unless you use FreeAgent, of course). Keeping your accounts in order is vital for the smooth running of a business though, and leaving them to the last minute can be a recipe for disaster. So this year, tackle your books on time, and experience the pure bliss that is filing your tax return early.
1. Money in the bank
If you leave your Self Assessment until just before the January 31st deadline, then you run the risk of receiving an unexpectedly high tax bill, with not enough savings put aside to comfortably pay it. Aside from being out of pocket, you’ll be liable for a £100 fine if you’re even a day late. The earlier you deal with your taxes, the more time you’ll have to budget for them. January can often be a month where the purse strings are especially tight, so do your sanity (and your bank account) a favour, and get that return filed ASAP.
2. All the time in the world
Completing your tax return requires you to get an awful lot of figures, reports and certificates together. Leaving this to the last minute runs the risk of you not being able to find some of these important documents, and potentially having to file late. On top of this, HMRC registration can take up to 10 days to provide you with your UTR confirmation code, so it’s in your interest to get that paperwork ready nice and early. This way, there will be no last minute scrabbling for files, and you can get things done in your own sweet time.
3. The joy of being organised
As the best-selling book by Marie Kondo testifies, there is joy to be found in being utterly and completely organised. If you can check Self Assessment off your list sooner, rather than later, it will be a huge weight off your shoulders. No longer will you spend the year dreading digging out those old documents, as it will be already done and dusted. Along with the feeling of sweet relief, you will now have freedom to fully focus on what’s really important - your business.
4. Freedom to enjoy the festive season
No-one wants taxes to be looming in the back of their mind while they’re tucking into turkey. The annual January 31st deadline for Self Assessment submission leaves a lot of freelancers fretting over the Christmas holiday. Get your taxes sorted well before winter, and you’ll be free to focus on much more important things, like eating your body weight in chocolate.
5. Time to find a great accountant (if you don’t have one already)
While you don’t legally require an accountant to help you file your Self Assessment, it can often be a good idea to let an accountant check over your work. Although FreeAgent automatically populates a lot of your tax return for you, by letting a pro take a look you can make sure that you haven’t missed anything out. Accountants are notoriously busy in the run-up to the Self Assessment deadline, so find one you like now, before everyone else books them up.
6. Self Assessment smugness
The final - and most important - reason of all to file your Self Assessment now, is the complete and utter smugness you can radiate from the moment you’ve filed. While your self-employed pals are complaining that they’re going to be bogged down in their books for the next few months, you can hit them with a ‘Self Assessment? Oh, I filed that months ago…’.
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- Turning over a new leaf: tips for organising your bookkeeping in autumn
- MTD for Income Tax: next steps for sole traders
- Hack to the future: how hack days inspire creativity at FreeAgent
- Video: self-employed business expenses by HMRC
- Finance Bill 2017-19: Making Tax Digital back on the agenda