With the number of people self-employed at the highest level its ever been, its obvious that becoming your own boss is a jump many more people are now choosing to take. Whilst being self-employed and running your own business comes with many advantages including flexibility and having more control over what you do, there is one serious sting that also comes along with it: taxes.
When self-employed, you have to take charge of your taxes yourself which means keeping all necessary business records consistently up-to-date. If you fail to do this, you could find yourself struggling with a huge tax bill youre unable to pay. To avoid this, below youll discover some top tips on how to keep watch over your business records.
Keep your personal and business finances separate
Treating your business as something completely separate to your personal life can be difficult, especially if you work from home. But from a financial perspective, its essential you do this as it will make keeping track of your finances and filling in the dreaded tax return so much easier.
Opening a separate bank account for your business earnings and expenses is the simplest way to do this. And, if you use credit cards for personal spending, theres no reason not to use them for business expenses too. As long as you keep up with your payments and dont spend mindlessly, this can build up your credit rating and give you the option to keep all business expenses coming from one place. Check out SmallBusiness.Creditcard to discover more benefits.
Know what you need to keep track of
Often, any mistakes made by self-employed people regarding their finances are unintentional. Keeping track of everything you need can be difficult, especially if you dont know what youre doing or havent been self-employed for very long. But, dont worry, because heres a comprehensive list of everything you need to monitor throughout the tax year:
- All forms of income your business receives (proof of invoices etc.)
- Receipts to keep track of business expenses
- All PAYE records if you employ others
Its also important to note that you need to keep all records for at least 6 years in case you receive a sudden request to present them.
Dont leave everything till the last minute
It may be boring and time-consuming, but regularly updating your financial records and ensuring theyre correct at all times will save you a lot of work in the long-run. If you leave sorting out all records a couple of weeks before your tax return is due, you could find yourself stressed and panicking to get everything sorted in time.
And, if you feel you need extra advice and can afford it, hire an accountant!
Running your own business and being self-employed certainly has a great number of advantages that attract many people. However, its not all fun and games and you have to be fully responsible for your profits and taxes along the way.
Harvey Faulkner has been self employed for much of his adult life. Book keeping and keeping up to date with the changes in law, as well as technology, can be a challenge but he shares his tips to help others along the way.