Don’t spend January 30-31st 2014 crying like my stand-up comedian friend Matt (NAME HAS BEEN CHANGED TO PROTECT DIGNITY). Last week, when filing his tax return, Matt mainly yelled “*@~!” before spending two days sifting through plastic bags containing every receipt he’s ever been given while trying to figure out what a tax return was. This did actually happen - I was there.
If you've started earning a bit on the side, freelancing, performing or any other type of self employment, here are his tips to ensure the beginning of next year is a Smiley Happy Time:
1. Work out everything you pay for to do with work. Every job is different, and you won’t get a simple answer for what’s deductible on the HMRC website as they’re trying to incorporate everybody (from actors to those who run their own companies), so have ideas in mind and then check them against the site. Because I’m a performer, I can claim haircuts, clothes and props, which is nice. If you go for a meeting with someone and buy them a coffee, that’s deductible. Anything from magazines, newspapers (research!) to trains, buses, stationery, food can be deductible depending on your job.
2. The website is really confusing, and you'll probably know someone who is an accountant. Ask them what your expenses are. Buy them lunch/dinner/a large teddy saying HUG ME.
3. I used to store my receipts in shoeboxes, a box file and plastic bags and this isn’t a good idea. Now, when I go on a train for work and it’s a taxable allowable expense, I put everything in my wallet - the train ticket, the collection receipt and all that. I probably have a sandwich, buy a drink, then at the end of the day I throw everything away apart from the paper receipt for my train ticket (make sure there’s a date, a destination and the price) and my sandwich and drink receipts (you’re allowed food for work). Which I put in my big 2012-13 tax envelope. Inside the big tax envelope are loads of smaller envelopes with the categories like “trains” and “cabs” and “food” and “clothes”.
4. Don’t go through all your mobile phone bills for the year on January 30 because it’s pretty much impossible and will take days. Get a printout each month and go through it with a highlighter then. You can also tag calls to make it easier if you’re ringing the same people day in day out - saves trawling through everything.
5. Some of your stuff may be invoiced, in which case keep all your invoices IN ONE PLACE. If things aren’t invoiced, or it’s all a big mixture, learn how to record your income on a spreadsheet. E-how have nice, clear instructions for setting one up, even if you’ve never used Excel in your life. You'll still need to keep paper copies of invoices and VAT receipts but a spreadsheet will make tracking a lot easier.
NB: If you have no idea what the hell a tax return is and you’re freelancing/doing jobs outside of your official, here’s-a-payslip-babe (otherwise known as PAYE) work then here’s the briefest, most straightforward guide you will ever read (NB check out Ideastap for more info on tax returns and general common tax return mistakes or, of course, the HMRC site):
PAYE work is automatically taxed. When you’re self-employed (i.e. getting paid outside of payslips), you spend money on stuff necessary for your work (transport, laptop, pen, paper, Dictaphone, ringing various people etc). The government are going to tax you on everything you’ve earned, but all the stuff you use for work can be taken off the amount you’re going to be taxed (hooray!). Every January, self-employed people add up their income, minus their expenses and minus a figure that changes every year (last year it was £8,000 - meaning you aren’t taxed on your first £8,000) and the answer is the amount the government can tax you on. So take 20% of this and you need to pay it. If you’re not earning a lot, you probably won’t need to pay anything, but you still have to go through the whole rigmarole.