Accounting for Freelancers

If youre thinking about going freelance and setting up your own limited company or have already done so the thought of managing the financial side of things is most probably going to give you sleepless nights! However simple your business model, as a limited company there are certain things you have to do by law, and failure to get it right could result in back taxes and potentially fines, we hope this accounting for freelancers guide is helpful.


So, what are the options?


1. Do it yourself!


The first available option is you could attempt to do your accounts yourself, but unless you are some kind of math’s whizz that also happens to understand the intricacies of HMRC and its multitude of forms, you might want to think again. Doing your accounts takes up valuable time you could spend either working, or socialising with friends and family. Also you stand an above average chance of making a mistake and getting your accounts rejected by the HMRC. These are the things an accountant will do for you.


2. Use an off-the-shelf or online bookkeeping package


Bookkeeping is simply the process of recording your business transactions, whether you record them in a book, a spreadsheet or a snazzy looking online package the activity is the same, YOU have to record them. You can pay people to do your bookkeeping for you, but you’re still the one saving receipts and sending over the information, if you forget to send something it’s unlikely the bookkeeper will ever know.


Now the above may all sound a bit ominous, however the good news is that as a freelancer it’s unlikely that your bookkeeping affairs will be too complex, after all, you’ll just be sending a few invoices (you’ll probably immediately spot if they haven’t been paid), have a few expenses, pay yourself and some taxes now and again (your accountant will help you with these) and that’s about it.


There are some very good low cost off the shelf packages, some online packages and also free accounting software, the knack is not to be lead by all the bells and how funky something looks, just bear in mind what you will be recording and how much of the system you’ll be using. Ultimately you’re the one who will be putting in the information, of course we’d advise getting an accountant to check things as no software package online or offline will tell you if you have incorrectly entered a figure or claimed for a non-valid expense. They are only as good as the information you put in.


3. Find yourself a good accountant


Find one that specialises exclusively in providing accountancy services for freelancer’s and contractors. Even though you might think your requirements are fairly simple, theres no substitute for working with a professional. All accountants will say they can cover all aspects of your Tax as a contractor, but the best solution is to go to specialists who deal with contractors in their particular situation every day who knows the intricacies of HMRC and can make sure that the financial side of your business is always accurate. See case study of the difference between using a specialist contractor and freelance accountant over a traditional high street accountant.


Added to this, a good accountant will also provide you with ongoing tax advice throughout the year and not just at the end when it will probably be too late to save you from an excessive tax bill. And in order to do this, they have to keep abreast of the UK tax system and all of its regulations and legislative changes. Above all make sure you can see your accountant, many firms have popped up that they just offer telephone advice, however there really is no substitute to being able to chat things through face to face.


For more information and advice on Accounting for Freelancers please read more at: http://www.sjdaccountancy.com/about/ourservices/accounting_freelancers.html

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