Tax preparation tips for self-employed

As a self-employed person, you’ll need to manage taxes yourself. But, if you’re not familiar with the UK tax process, you may worry about how to handle it efficiently. 

There are plenty of ways to save time and organise your taxes like a pro. We can help you uncover the best tips. 

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

• Scheduling in time 
• Separating your finances
• Noting the deadlines
• Knowing how to reduce your bill legally  
• Creating a tax plan

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

Taxes can be a tedious and confusing process when you need to handle them yourself. 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 go-to tactics.

It’s far easier to stay on top of your finances if you dedicate regular time to it. Try setting aside a few minutes each day to look over your self-employed transactions. Then, update your records accordingly at the end of each week. 

When you maintain financial records each week, you won’t have to devote large chunks of time to it at the end of the month or quarter. You’ll need to look over your spreadsheet to ensure you didn’t miss anything. 

Putting in small amounts of time throughout the year will save you hours when it’s time to file taxes, saving you stress during the final stretch. 

To organise your finances properly, consider opening a business current account. This account allows you to separate your self-employed finances from your personal ones. 

With an account specifically for your operations, 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.  

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 to 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. 

Learn more with our article on how a sole trader can reduce their tax bill. 

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 – £50,370 – 20% 
• £50,271 – £150,000 – 40%
• Over £150,000 – 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.