Accounting for freelancers
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DIY Accounting for Free lancers. Accounting for Freelancers. Presented by Tim Wicksteed SWMobile “Going Freelance” 29/05/13. www.twicecircled.com @ twicecircled [email protected] Step 1 - Should I Self-Account?. Accountants cost money… BUT It takes time to do your own accounts

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Accounting for Freelancers

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Accounting for freelancers

DIY Accounting for Freelancers

Accounting for Freelancers

Presented by Tim Wicksteed

SWMobile “Going Freelance” 29/05/13

www.twicecircled.com

@twicecircled

[email protected]


Step 1 should i self account

Step 1 - Should I Self-Account?

Accountants cost money…

BUT

It takes time to do your own accounts

Is your time better spent working?


Accounting for freelancers

“I’m going to do my own accounts!”


Step 2 sole trader ltd company

Step 2 – Sole trader/Ltd Company

  • Sole trader means only one tax form to fill in at the end of the year.

  • Limited company is significantly more complicated but there are advantages:

    • Tax efficient

    • Possibility to expand business, take on staff/contractors

    • Limited liability

      This presentation only deals with the Limited Company route.


Step 3 setup

1Unique Taxpayer Reference

Step 3 – Setup

  • Incorporate your company with Companies House

  • Receive UTR1 from HMRC in the post

  • Request an Authentication Code for Web Filing from Companies House

  • Register your company with HMRC/Government Gateway

  • Wait until you start trading

  • Log-in to HMRC and use your UTR1 to enrol for Corporation Tax

  • Receive confirmation pin from HMRC in the post

  • Enter pin into HMRC to finalise enrolment

  • Repeat steps 6-8 for PAYE (if applicable)


Step 4 keeping accounts

Step 4 – Keeping Accounts

  • Optional guidelines are in Financial Reporting Standard for Smaller Entities (FRSSE), effective April 2008

  • Make a spreadsheet to track everything at the beginning!

  • Update it as you go along!

    Use my simple template


Step 5 paying yourself

Step 5 – Paying yourself

  • Option 1 – Dividends and more dividends!

    • Pay 20% corporation tax on everything.

    • Pay additional 25% on any dividends beyond £32,010 (before tax)

  • Option 2 – Tax free salary + Dividends

    • Pay 0% on your salary up to £7696 (2013/14 Secondary Threshold)

    • Pay 20% corporation tax on everything above £7696

    • Pay additional 25% on any dividends beyond £32,010 (before tax, including the £7696 salary)


Quick recap

Quick recap:

PROFIT = GOOD!

WRONG!

Corporation tax is proportional to profit!


Step 6 expenditure

Step 6 - Expenditure

  • Standard expenses

  • Things your company pays for directly:

    • Salaries

    • Rent

    • Utilities

    • Etc.


Step 6 expenditure 2

Step 6 – Expenditure (2)

  • Reimburseable expenses

  • But wait! Only certain items can be reimbursed by your company as business expenses, see 480 and 490.

  • Key notes:

    • Business mileage in your own car can be reimbursed (without receipt) at 45p per mile (< 10000 miles)

    • Keep a record of every trip you make though

    • Receipted travel and subsistence (hotels, trains) have to declared on form p11d and self-assessment. Excellent explanation.

    • Get a dispensation to avoid the hassle.

    • However for both of these you need to register your company for PAYE.


Step 6 expenditure 3

Step 6 – Expenditure (3)

  • When you buy equipment your company does not incur a loss

  • Appears as asset on balance sheet

  • Hence, does not reduce corporation tax liability

  • Annual Investment Allowance (AIA) for capital expenditure:

    • Equipment

    • Software

  • £250000 for 2013/14


Step 7 corporation tax return

Step 7 – Corporation Tax Return

  • Decide on your company’s tax year

  • Login to Companies House and change your company’s accounting period to line up with your tax year

  • Wait until the company’s tax year has finished…

  • Login to HMRCand file your corporation tax return – you will have an option to change the dates!

  • Follow the process through and download form CT600

  • Use the Joint Filing service to do your Company Accounts simultaneously

  • Your spreadsheetshould have all the numbers you need to complete the form

  • Settle up the corporation tax due 9 months later


Accounting for freelancers

“I’m going to do my own accounts!”


Accounting for freelancers

Questions?

Presented by Tim Wicksteed

www.twicecircled.com

@twicecircled

[email protected]

Slides available at: http://www.twicecircled.com/resources/tools/accounting/accounting_for_freelancers.pptx


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