Tax preparation tips for self-employed

When you’re self-employed, you can manage taxes yourself. But if you’re not familiar with the UK tax process, you might be worried about it.

There are plenty of ways that you can save time and money, whilst organising your taxes. We’re here to share some tips. 

This guide lists tried and tested tax preparation tips for the self-employed, including:

• Scheduling in time 
• Separating your finances
• Keeping track of deadlines
• Knowing how to reduce your bill legally  
• Creating a tax plan

Instead of automatically subtracting taxes through the PAYE program, self-employed people need to report their earnings to determine what they owe. You’ll do this by submitting a Self Assessment tax return. 

Taxes can be tedious and confusing but with a few quick tricks, you can manage the process with ease. 

So what are the best tax preparation tips to make your tax management efficient? Let’s look at some key tips.

It’s far easier to stay on top of your finances if you dedicate regular time to it. Try setting aside a few minutes every day to check over your self-employed transactions. When you maintain financial records each week, you won’t have to spend hours doing it at the end of the month or quarter. With Countingup, it’s simple. You’ll just need to review your transaction categories – we’ll let you know which categories need reviewing with an orange dot.

Putting in small amounts of time every week will save you hours when it’s time to file taxes, saving you stress during tax season.

To organise your finances properly, consider opening a Countingup business current account. A separate business current account allows you to separate your self-employed finances from your personal ones, which is required if you’re a limited company.

With a business current account specifically for your business, you won’t have to comb through bank statements to find relevant expenses and earnings. It will cut down the time it takes to update your bookkeeping massively!

Another major tax preparation tip is to note the deadlines so you don’t miss them. When you file your own taxes, it’s important to do so on time to avoid penalties or accidental tax evasion. 

The following are a few key deadlines to know:

• 5 October – Register for Self Assessment (if you haven’t filed before)
• 31 October – Deadline for the paper tax return submission 
• 31 January – Deadline for the online Self Assessment submission
• 31 January – Pay your taxes

It’s important to know what information to report so you only pay what you need in taxes.  

You’ll need to pay taxes based on what you earn from your self-employed operations. But, you can deduct certain business expenses to reduce your taxable income. So, make sure you know what costs are deductible. 

Some tax-deductible expenses include: 

• Office costs 
• Travel expenses
• Advertising and marketing 
• Financial costs 
• Training 
• Software
• Shop rent 

To benefit from this relief, keep accurate records of your self-employed expenses, including receipts. 

Creating a tax plan at the beginning of the new tax year (6 April) can help you streamline and prepare for the process. 

Start by estimating how much you may need to pay in taxes next year to avoid surprises. With a clear idea of what you might earn, you can better understand how much your tax bill will add up to. 

Calculate potential taxes based on the self-employed rates: 

• Up to £12,570 – 0% (also known as a personal allowance)  
• £12,751 – £50,270 – 20% 
• £50,271 – £125,140 – 40%
• Over £125,140 – 45%

Whatever you expect to earn annually, subtract the personal allowance before calculating your potential taxes. 

Saving money should be another key part of your tax plan. Try setting aside about 20% of your cash earnings to cover impending taxes. This way, you won’t struggle to cover the expenses come 31 January. 

Though you don’t need an accountant to file a Self Assessment tax return, you may seek one to help you get it right. Accountants’ experience and expert advice can take some of the responsibility and worry off your hands. 

Modern accounting software is another great way to simplify your tax process and save valuable time on financial organisation. 

Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK. 

This app includes great features like: 

• Automatic expense categorisation 
• Receipt capture with instant reminders 
• Year-round tax estimates 
• Making Tax Digital compliance – easily share your financial data with your accountant

Save yourself hours of accounting admin so you can focus on growing your business. 

Start your 3-month free trial today.