By Jonathan London on 5th April 2013

Should auld receipts be forgot, and never be brought to mind

 New Tax Year – April 6th 2013

1.5 million self-employed Brits admit getting their tax wrong.

850,000 fined for missing tax filing deadline in 2012

Last year more than 850,000 [1]people failed to file their tax returns on time, incurring fines totalling more than £85 million.  And an astonishing 1.5 million[2] self-employed Brits say they have got their tax calculations wrong.  This year Boox, the cloud-based accountancy solution, is encouraging the self-employed, who account for 14% of the working population, to make some New Tax Year Resolutions as the new tax year comes around on April 6th to help them to stay on top of their books in 2013.

Giving up chocolate, cigarettes and alcohol are always on top of the hit list for New Year’s Resolutions and can save you money, but what about getting your accounting in order?…

says Phillip Venn, Commercial Director of cloud-based accountancy solution Boox.

We want to encourage the 4 million+ Brits who are self-employed to make a new tax year resolution to get their financial administration in order, reap the financial benefits and avoid hours of admin as the deadline for filing returns comes round.…

Resolution 1: Budget adequately for tax

I will understand what PAYE and VAT I need to pay by April 6th

Many freelancers understand how much money they need to set aside to cover their tax and national insurance contributions.  According to the Boox Report, 11% have paid too little and 26% have paid too much.  As a rule of thumb people should be saving approximately 30% of their gross income if they earn under £41,450 a year and 50% if they earn over.

Resolution 2: Manage Expenses Correctly

I will manage my receipts and invoices correctly

3% of contractors store their receipts within a plastic bag and another 10% have a bulging drawer dedicated to this. This is obviously not the ideal as it could be confusing when you need to come back to review in January – find a way that works for you. Alternatively, Boox have recently teamed up with Shoeboxed to offer self-employed contractors the capability to effortlessly digitise their expenses and receipts via a smartphone. Once uploaded, the item will be recognised within the accountancy platform within 24 hours.

Resolution 3: Make sure you’re getting paid on time

I will send my invoices out in a timely manner and check my bank account to make sure they’ve been paid

15% of self-employed people fail to send out their invoices on time according to the Boox report. It’s hard to insist you receive payment in a timely fashion if you have failed to issue an invoice promptly.  If you are one of the 630,000 freelancers who fail to send out invoices try treating invoicing like a job.  Set aside a dedicated time each month to get those invoices out and check your bank account to make sure you’ve been paid (see our guide to invoicing here).  If you make a note of when each invoice has been paid, you won’t have to wait until you trawl through your bank statements and invoices at the end of the year to realise you’re owed money.

Resolution 4: File your tax return early if you are likely to be due a rebate

I will claim my rebate as quickly as possible

Over a million freelancers 26%, have paid too much tax.  If you are due a rebate, file your tax return as quickly as possible.  You can file your return from April 6th and get the money you are owed quickly instead of waiting until the end of the next tax year.

Resolution 5: Understand what can and can’t be offset against tax

I will get advice from an expert in accounting

Many self-employed people leave it to HMRC to calculate their tax each year.  This means they could be missing out on opportunities to off-set expenses and the general running costs of their business against their income.  HMRC runs free courses throughout the year to help self-employed people understand what can and can’t be offset against earnings.  If you plan to do your tax return yourself you could get a better deal on tax by giving up half a day of your time to attend one of these courses.  Alternatively, the cost of paying an accountant or working with an online accountancy firm such as Boox can frequently pay for itself when you come to file your return.

The Boox call for New Tax Year Resolutions resulted from the findings of its study of 1,000 British self-employed contractors which found that one in four is uncertain of the amount of tax they are required to pay each year. 42% of freelancers manage their own finances without the help of an accountant, 4% turn to family or friends and 54% use a personal accountant or online accounting service like Boox.  One in five miss the self-assessment deadline altogether and are charged at least £100. Follow up fines, according to HMRC, are as follows –

Penalties for missing the tax return deadline
Length of delayPenalty
1 day lateA penalty of £100.
3 months late£10 for each following day – up to a 90 day maximum of £900. This is as well as the fixed penalty above.
6 months late£300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
12 months late£300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead.

For more information, please download a free copy of the report.

[1] http://hmrc.presscentre.com/Press-Releases/HMRC-issues-tax-return-penalties-675ca.aspx

[2] http://www.boox.co.uk/news/boox-report/

Jonathan London Written by Jonathan London

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