The FreeAgent Blog
Posted on 22 January 2018 by Emily Coltman - Jump to comments
Wednesday 31st January isn’t just the date by which you have to submit your Self Assessment for the 2016/17 tax year to HMRC. It’s also the date by which you have to pay your tax bill - so it’s important to get organised and make sure that your payment reaches HMRC before the midnight deadline.
Here’s a handy rundown of the main payment options that HMRC accepts, how long each type of payment takes to process and how you can use each payment method.
Please note, you can no longer pay at the Post Office and personal credit cards are no longer accepted.
|Payment type||How long it takes for the payment to reach HMRC||How you can pay|
|Online or telephone banking (Faster Payments)||Same or next day, including weekends and public holidays||By using the bank details listed on gov.uk|
|CHAPS||Usually the same working day (if you pay within your bank’s processing times)||By using the bank details listed on gov.uk|
|Debit card online||HMRC will accept your payment on the date you make it, not the date it reaches their account - including on weekends and bank holidays||By following the links from your HMRC online account.|
|Business credit card online (1.5% charge)||HMRC will accept your payment on the date you make it, not the date it reaches their account - including on weekends and bank holidays||By following the links from your HMRC online account.|
|At your bank or building society (only an option if you still get paper statements from HMRC and have the paying-in slip they sent to you in the post)||Same day (Monday-Friday only)||By paying cash or writing a cheque made payable to 'HM Revenue and Customs only' followed by your Unique Taxpayer Reference (UTR) followed by the letter ‘K’.|
|Bacs||Three working days||By using the bank details listed on gov.uk|
|Cheque through the post||Three working days||By writing a cheque made payable to ‘HM Revenue and Customs only’ followed by your Unique Taxpayer Reference (UTR) number. It should be posted along with your paying-in slip to HMRC, Direct, BX5 5BD – no street name, city name or PO Box is required.|
|Existing Direct Debit||Three working days||By setting up a Direct Debit from your HMRC online account. (Note that you have to set up a new direct debit every time you wish to make a payment).|
|New Direct Debit||Five working days||By setting up a Direct Debit from your HMRC online account.|
Note: For payments where a reference is required you will need to use your 10-digit Unique Taxpayer Reference (UTR). Where a payment reference number is asked for you should use your UTR followed by the letter 'K'.
Whichever method you plan to use to pay your tax bill this year, if you’re planning to meet the deadline then make sure you file your Self Assessment with HMRC in enough time to allow your payment to reach them before the 31st January. Otherwise you will have to pay interest and may even face a penalty, even if you manage to file your tax return on time.
Don’t forget that online payment services may be slow during busy times - you can check online if there are any current problems or times they aren’t available.
Posted on 15 January 2018 by Fiona Hendrie - Jump to comments
You don’t have to be Garfield to dislike Mondays. Running your own business has tons of benefits, but that doesn’t mean you’re immune to a case of the new work week blues.
Mondays don’t have to be the scourge of your week though, so we’ve assembled some tips to make them downright bearable, and perhaps, dare we say it, enjoyable.
Refresh your workspace
It has been proven that tidier people are generally healthier and happier, and that clutter makes it much more difficult to focus on tasks. Before you get on with your usual Monday routine, take some time to tidy up your workspace. Once things are clean and organised, you might want to put on some mood-boosting music, which has been proven to make you feel happier and more creative.
Another top tip to cheer up your working environment is purchasing a new houseplant. Indoor plants have been shown to reduce stress and improve concentration, as well as looking pretty lovely too. If you invest in one like Aloe Vera, it will also improve your air quality (it’s NASA approved!).
Move it, move it
If you’re already at the pinnacle of health, then feel free to stop reading here. But if like most of us, you could do with a few healthy boosts to your weekly routine, then read on. Monday is a perfect opportunity to head into the week feeling strong - you might want to take up a new Monday evening gym class, or perhaps make Monday your designated lunchtime run day (guaranteed to blow away any weekend cobwebs).
Get organised for the week ahead
After a weekend of fun, your projects from last week might feel like a bit of a distant memory. Make your first priority on Monday mornings writing down a to-do list - either for the day, or the week. Whether it’s a spreadsheet of tasks, an online productivity tool like Evernote, or simply jotting everything down in a notebook, nothing is quite as satisfying as crossing (or deleting) an item off that list. If nothing else, being organised has been shown to decrease stress and boost your energy levels.
Make time for Monday socialising
Nothing brightens up a dreary Monday quite like getting together with fellow freelancers to share stories, ideas and connections. Websites like Meetup and LinkedIn are really helpful for finding other nearby freelancers in your profession. If you can’t find a group that suits you - why not start one? Then you can look forward to your Monday coffee (or cocktail..) club every week.
Learn something new
There is always room to learn something new, no matter how accomplished you might be in your field. If you find Mondays a a bit of a drag, then turn them into your weekly opportunity for a learning sesh. Find a relevant online course from sites like Udemy or Memrise and pop some time in your calendar even Monday to dedicate to studying something new. The routine will hopefully help your new habit stick, and give you something exciting (and business boosting!) to look forward to every week.
If all else fails…
...and you just can’t beat that Monday slump, then just enjoy this cat video, along with the fact that you won’t have to sit through another Monday for a whole week.
Posted on 8 January 2018 by Fiona Hendrie - Jump to comments
Last month, the fountain of knowledge that is our chief accountant Emily Coltman FCA, sat down with Michelle Carvill from MadeSimple to talk accounting for the self-employed.
As part of the MadeSimple StartUp Community’s weekly ‘Tuesday Teach’, Emily put her expertise to good use and answered some of the community’s most frequently asked questions:
"What is Self Assessment and who needs to file it?"
In our accounting glossary, this is how we define it:
“Self Assessment is short for the 'Self Assessment tax return', a form that many business owners need to send to HMRC each year to report how much they have earned and from what sources.”
It is likely that you will need to fill out the Self Assessment tax return if you are:
- the director of a limited company
- receiving income from a property or trust
You have to send this tax return to the government by the end of January, and it will cover all your income information from 6th April one year to 5th April the following year. For example, the upcoming Self Assessment deadline of January 31st 2018 requires information about all your income between 6th April 2016 and 5th April 2017. The government body that monitors the collection of tax returns is HMRC (Her Majesty's Revenue and Customs).
"What happens if you don’t submit your Self Assessment tax return on time?"
If you’re even one day late, you’ll be subject to a £100 fine. After three months the amount you’re charged starts to go up - and you can end up being penalised up to £10 a day. If there are exceptional circumstances, you can sometimes appeal these fines but HMRC is quite strict; in a recent tribunal someone appealed their late payment fine due to having had an operation, and as it was a planned operation HMRC deemed that it was not a reasonable excuse for missing the deadline. So get your affairs in order well in advance, or you could end up paying a lot more than just your tax bill! If you have any concerns about submitting your Self Assessment or paying on time, talk to an accountant.
"What are the biggest mistakes you’ve seen when people file their tax return? Are there common errors?"
There are a few things that people tend to trip over when it comes to Self Assessment:Joint accounts
When filling in your tax return, you have to declare how much interest you’ve accumulated on your bank accounts. If you have a joint account with someone else, make sure you only enter 50% of the accumulated interest on your tax return.ISA
If you have an ISA, you don’t need to record that interest on your tax return as it’s tax free income.Year end
If you’re self-employed, you might prepare your accounts each year to a date that doesn't match the end of the tax year (e.g. January 1st - December 31st). If you do this, be aware that the bank interest that you put on your tax return still needs to be for the tax year, not your business’s accounting year.
You don’t have to worry about year ends with FreeAgent, as the software works out how much interest you’ve accumulated in the tax year, rather than in your accounting year.Expenses
Mistakes relating to which expenses you can and can’t claim are quite common. Common mistakes include claiming too much or too little business use of home costs, or trying to claim home to work travel as a business expense. We have a wealth of resources on our website to help freelancers work out their expenses:
"Should I register as a sole trader or a limited company?"
You might have heard that you can save tax by running your business as a limited company instead of a sole trader. This can sometimes be the case, but there are are a few important things to bear in mind before you take the plunge. There are positives and negatives to both options, and it really depends on your own unique situation:
Sole traders are legally one and the same as their business. They only have one form to file to the government each year: a single Self Assessment tax return. Sole traders also have the luxury of being able to withdraw money from their business account as and when they please - as long as they pay their tax, HMRC doesn’t care! Overall, being a sole trader means there are fewer forms to complete, fewer rules to abide by, and it’s a much simpler way of managing your business finances. However, it’s worth bearing in mind that if your business is sued, your personal assets, rather than your business’s assets, will be at risk.
Limited companies are just that: companies. If you choose to operate your business as a limited company, you and it are completely separate legal entities. Limited companies have to file at least four forms each year to HMRC and/or Companies House:
- a set of accounts for the company
- a confirmation statement for the company showing who controls and owns it
- a tax return for the company
- a tax return for the director
Taking money out of your business accounts is not nearly as simple for limited company directors, who can't withdraw money as and when they please. If you want to draw a salary from a limited company you’ll have to set up a payroll system. If the company pays you and/or any employees a monthly wage that will mean 12 extra filings to HMRC - and if the company pays a weekly wage you’ll have to file for each of those!
One of the upsides of operating your business as a limited company, however, is that if your business is sued, you have limited liability protection and your business’s assets - not your own - would be liable.
"What are your top four financial tips for freelancers who are starting out?"
Get yourself a business bank account.Draw a very clear line between your personal and business funds. The sooner you do this the better, so sort yourself out with a business account as early as possible.
Be really organised and have your books in order from the get-go. Keep a record of everything you spend, whether it’s snapping photos of receipts (which HMRC largely accepts) or keeping your paper copies all neatly filed away. Taking some time to set up a filing system now will save you a big headache in the long run.
Remember that if you are running your business through a limited company, you and the company are legally separate. The income belongs to the company, not you. You have to be very careful about getting that income back into your pocket, or you might find yourself liable for tax you haven't bargained for.
Find yourself a good accountant. There is no substitute for an experienced, knowledgeable accountant. Even more important is that they know your industry, and can clearly explain your accounts to you. At the end of the day, it’s your business and you’re responsible for it. If you’re not getting the most out of your current accountant - check out our directory to find one that’s a good fit for you.
Watch the full recording of Emily’s interview over on the MadeSimple startup community.
Posted on 4 January 2018 by Victoria Shepherd - Jump to comments
Back in 2017 (remember then?) we spread some seasonal cheer by holding a virtual Christmas party on Facebook for the ‘elf-employed’ and loads of small business owners and freelancers joined us for a day of online festive fun and frolics.
In between exchanging photos of our Xmas knitwear, we asked the partygoers what their small business resolutions for 2018 were. Here’s a few of the excellent responses we received and some tips for how to turn best intentions into reality.
"Do tax returns on time!"
If you’re currently eyeing the 31st January Self Assessment deadline with a creeping sense of dread, a great place to start is our Self Assessment checklist - everything you need to take you through the Self Assessment process step by step, right through to filing.
Going forward, a basic but effective way to get organised is by putting your tax return paperwork somewhere safe as soon as it arrives. Buy a box file and use it to keep important documents for each tax year, such as interest certificates from your bank, dividend vouchers showing money received on shares, and so forth.
Make sure you’re also keeping on top of your day-to-day business accounts and your expenses too, as this will help save you time and hassle when it comes to filling your Self Assessment tax return next year. With the right system in place, you can keep your records up to date and accurate in just an hour a week, so why not block off this time in your diary starting from January?
"Pay for a flu jab. Done it every year since becoming self employed. Guess what happened when I didn’t this year?"
The absence of sick pay has traditionally been one of the downsides of being self employed - a survey showed that a huge 82% of micro-business owners have worked through an illness because they felt they couldn’t afford to take time off*.
Making sure you build a decent buffer into your rate to cover yourself is so important. You can set aside this extra money as your own personal insurance policy, whether it be for illness, maternity/paternity cover or even just downtime between jobs.
Insurance products like an income protection policy could also offer you some cover. Usually income protection insurance covers a wide range of illnesses and situations and has the potential to pay out for many years. As with any insurance, getting the right policy for you and your specific circumstances is key – so it’s worth seeing an independent financial adviser or broker for advice.
"Take a holiday for the first time in years!"
Being cooped up with the relatives, watching terrible TV, ferreting through the Quality Street tin to avoid the fruit creams - the Christmas holidays aren’t always as enjoyable as they could be. You need a proper holiday to look forward to!
Unfortunately when you run your own business it’s not always easy to feel you can step away to enjoy some well deserved downtime, but there are some straightforward ways to make sure things keep ticking over while you’re away. Automated responses to messages, either through an automatic out-of-office email responder or a social media automation tool like Hootsuite, can really pick up some of the slack. If you want your clients and suppliers to receive a more personal response, you could even consider outsourcing some of these tasks.
When it comes to staying on top of your cash flow, FreeAgent’s automatic email reminders will chase outstanding invoices for you. You’ll enjoy that piña colada even more knowing that late payers aren’t being let off the hook.
"To actively go client hunting"
If you’re on the prowl for new clients, you could ask the existing clients who you enjoy working with to refer you to their friends. You might even want to consider setting up a dedicated referral scheme, so that your existing clients receive a reward for every customer that they successfully introduce to your business.
You could also consider introducing a special offer or discount for new clients. Offering them a percentage discount on their first purchase from you or a multi-buy discount may seem like you’re taking a hit to your bottom line, but it could be worth it - especially if it encourages them to use your business again in the future. As a bonus, you could extend the discount for a normally quiet period, hopefully boosting your cash flow.
If you’re ready to revolutionise the way you manage your small business accounts this year, give FreeAgent a try today for free. From expenses, payroll, and time tracking to estimates and invoices, FreeAgent helps you take care of business day-to-day. You can get on with enjoying an awesome 2018!
*Survey of FreeAgent customers conducted in January 2017 with 366 total respondents.
- Introducing the Spring Statement
- Share the self-employment love this Valentine’s Day!
- Introducing the Customer Sales Report
- Five stages of Self Assessment stress
- Know how long it will take your Self Assessment payment to reach HMRC