New year tax resolutions - Business Works
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New year tax resolutions

Phillip Venn, Commercial Director, Boox Last year more than 850,000 people failed to file their tax returns on time, incurring fines totalling more than £85 million. And an astonishing 1.5 million self-employed Brits say they have got their tax calculations wrong. Phillip Venn, Commercial Director of cloud-based accountancy solution Boox, 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 has just started to help them to stay on top of their books in 2013.

make a new tax year resolution

"Giving up chocolate, cigarettes and alcohol are always on top of the hit list for New Yearís Resolutions and can save you money, but what about getting your accounting in order?" says Phillip. "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 15th
Many freelancers understand how much money they need to set aside to cover their tax and national insurance contributions. According to our research, 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. Alternatively, if they want to know exactly how much money to set aside from each job they can join a cloud-based accountancy service like us.

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 Ė find a way that works for you. Alternatively, we 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 youíre getting paid on time

I will send my invoices out in a timely manner and check my bank account to make sure theyíve been paid
We find that 15% of self-employed people fail to send out their invoices on time. Itís 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 youíve been paid. If you make a note of when each invoice has been paid, you wonít have to wait until you trawl through your bank statements and invoices at the end of the year to realise youíre owed money. Alternatively, there are services like ours that enable you to generate invoices online and automatically reconcile them with payments into your bank account, alerting you if an invoice is overdue.

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 canít 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 canít 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 using an online accountancy service can frequently pay for itself when you come to file your return.

Our New Tax Year Resolutions and findings come from a study of 1000 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. 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 delay Penalty
1 day late A 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 about Boox, please visit: www.boox.co.uk



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