Sunday, January 08, 2006

In the Money

If the time has come to take the plunge from cushy full-time job you hate to the uncertain freelance excitement (or hell) of writing for a living, then there’s one issue that must be resolved before you go any further on your adventure.

Tax.

The step from employee to ‘self-employed’ is a very basic one but there are one or two small matters to take into account before you forget, and d’oh!, you end up with a fine because of your innocence.

First of all, you have to tell the tax office that you’re now self-employed. If you don’t register your new job status within a certain period (I think it’s 60 days, but it could be fewer), then they’ll fine your ass for not telling them.

There are two things in life that I seem to have a complete mental block on how to do properly. DIY and Tax. And just like the letters DIY don’t seem to be in my alphabet, the word Tax is nowhere to be found in my vocabulary.

But that was then, this is now. I can now proudly boast of the basic knowledge required to steer your way through the jargon and dubiously posed questions of your tax return. (I can also put up shelves and other basic DIY tasks. I have pictures.)

Of course, you can pay someone to do it for you - an accountant - but if you’re just starting you won’t be able to afford one. There’s no other way around it, you’ve just got to learn the basics of bookkeeping and take responsibility for your income.

I am pleased to report that it is rather straightforward. Indeed, some may be reading this and are thinking: “it’s only tax, get over it”. But what do you do? Where do you go?

Check out the Inland Revenue’s Self Assessment Home Page. That will tell you what you need to know and where to go about setting things up.

If you’re not ready for that, why not locate your nearest tax office for the advice you need.

It may sound a bit remedial after these simple steps but there’s even help for the self-employed at this link.

Put off by the web? Want to speak to a human bean (sic)? Then punch in the numbers for the Self Assessment helpline: 0845 9 000 444.

And don’t, whatever you do, forget about National Insurance (NI). Basically, if you’re self-employed you pay ‘Class 2’ NI contributions (NIC) at a flat rate weekly amount of £2.10.

You also pay ‘Class 4’ NICs as a percentage of your taxable profits. Go to the NI rates and allowances website HERE or call the helpline on 0845 302 1479 to help you set up the Direct Debit needed to pay your ‘Class 2’ contributions.

This may sound like I know what I’m talking about but I don’t really. These are the basics that you absolutely, definitely must know and organise. I’ve gone from being ‘completely hopeless’ to ‘a little useless’.

But to their credit, the Inland Revenue have made matters easier than I could have ever envisaged with their helpful website and the ‘submit your tax return on-line’ is a must if you’re a moron like me.

The Inland Revenue also have a team of ‘Small Business Advisers’. They’re the Revenue’s best kept secret. You never hear about them or know of their existence - I couldn’t even find any details on the Revenue’s website - but they’re there, somewhere, and they’re willing to help.

Basically, once you manage to find them (just phone the tax office and ask them where the hell they’re hiding them), they’ll arrange an appointment with you to discuss your situation and what you need to be aware of. If you can’t make it to them, they’ll come to your house! This service is free!

My guy came around and I offered him a home-made muffin to which he said if it cost more than £5, then he’d have to mark it down as a potential bribe! Ha! Anyway, he was extremely helpful. He explained the tax situation in basic terms that I could understand and more importantly, told me what I could claim as expenses.

So if you don’t get the answers or help you need from the above links at the Inland Revenue, try and track down the Small Business Advisers and they’ll do the trick.

Right, I’m off to fill in this year’s tax return. I got a reminder on Saturday which sent me into mild panic and confusion as it said ‘I had nothing to pay’ but ‘where was the tax return?’

You pay your tax in advance (based on an assumption of your first year’s earnings as a freelancer) so I had done that but in the haze of last year, I forgot to submit for 04/05, which I have to do before end of Jan. Now where’s that Small Business Adviser’s number, godammit?

2 comments:

Lucy said...

There's some great information here - thanks! I took the plunge in September 05 to run my own business full time and it IS really nerve wracking - the sheaves of paper arrive, one after another, demanding numbers, dates, BLOOD - it's enough to truly melt your brain. Lucky for me, I've had my own personal advisor - my Mum! She has balls of steel and a nose for jargon, having run her own business for years as a crafter, else I think it actually would be dribbling out of my ears by now! Happy New Year! L

Stu said...

Jez! Do you work at all? :-)