Freelance Lady: Understanding Tax As A Freelancer

For anyone who works on a freelance basis, the issue of tax is a hugely important one. The last thing you want is to struggle to understand it or come to terms with it, or to even land in trouble for getting it wrong in some way. But understanding and making the most of tax can be hard for many, in part because there are so many things to consider. In this article, we are going to try and make it a little easier to understand everything you need to know about tax if you are freelancer, so that you can hope to make much more of it and so enjoy your freelance lifestyle all the more as a result. Let’s take a look now at the major considerations you will need to wrap your head around as soon as possible.

Declaring It

The most important thing to remember is that you need to declare your tax each year in a tax return. Anyone who has never had to do this before might easily forget it, and misunderstand its importance, which can be worrying and cause some trouble, so it is important to remember to do it before the deadline. You should aim to fill in your tax return as early as you can. This is important for a number of reasons: for one thing, you don’t want to have to do in under stress, which makes it easier to mess up. It’s also a case of trying not to leave it too late, as you might be surprised at how much is involved and how much data you need to have around you to make sure you can get it right. Finally: it should go without saying, but remember to be fully honest, as you don’t want to be caught out trying to cheat the system. As long as you consider all this, you will find that you can easily fill out your tax return without too much trouble.

Deductions

This is the part that excites most people, and which you will probably be keen to make the most of as a freelancer. There are a whole range of things you can claim back on tax deductions, but you need to understand what is eligible and what is not, as well as how much you can claim and how to make sure you do so properly. In general, you can claim anything which is directly related to your work, and once you look into this it is surprising how much that includes. You can claim travel expenses which are relevant, as well as a portion of your rent if you work from home - along with a share of your energy bills and so on, too. You can also claim money back on any health issues which might arise as a result of your work - for those who work at a computer all day, that might include eye test costs and the cost of glasses, whereas if you work in a loud environment, you can probably claim on the likes of hearing aids, even if it is the latest technology that you are treating yourself to there.

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Bear in mind that deductions take an amount off the final amount of income you owe tax on, rather than acting as a direct discount or refund. It is still worthwhile, however, and you will find it is absolutely a good idea to make as much use of deductions as you can. If you are unsure about any of it, you can ask the tax office or visit their website to learn more.

Keeping Records

Arguably one of the most important concerns is that you actually keep records of your income, deductions and so on as best as you can. This is a legal responsibility, and you need to be able to show it if you are called up for an audit, which can happen at any time. These records can be on paper or digital, stred however you like, as long as you have safe access to them and you can read them easily. You should keep records as you go along, rather than trying to do so retrospectively, as that would be a much harder way to go about it. You will find, apart from the legal side of things, that keeping records also helps you to keep on top of things personally, so it is worth doing so.