accounting for freelancers
DESCRIPTION
DIY Accounting for Free lancers. Accounting for Freelancers. Presented by Tim Wicksteed SWMobile “Going Freelance” 29/05/13. www.twicecircled.com @ twicecircled [email protected]. Step 1 - Should I Self-Account?. Accountants cost money… BUT It takes time to do your own accounts - PowerPoint PPT PresentationTRANSCRIPT
Accounting for Freelancers
Presented by Tim WicksteedSWMobile “Going Freelance” 29/05/13
DIY Accounting for Freelancers
www.twicecircled.com@[email protected]
Step 1 - Should I Self-Account?Accountants cost money…
BUTIt takes time to do your own accounts
Is your time better spent working?
Yes NoSteady work? Unsteady work?
Good rates? Not freelancing full-time?
Professional accounting £30/m Control freak
Genuine interest?
“I’m going to do my own accounts!”
Step 2 – Sole trader/Ltd CompanySole trader means only one tax form to fill in at
the end of the year.Limited company is significantly more
complicated but there are advantages: Tax efficient Possibility to expand business, take on
staff/contractors Limited liability
This presentation only deals with the Limited Company route.
Step 3 – Setup1. Incorporate your company with Companies House2. Receive UTR1 from HMRC in the post3. Request an Authentication Code for Web Filing from
Companies House4. Register your company with HMRC/Government
Gateway5. Wait until you start trading6. Log-in to HMRC and use your UTR1 to enrol for
Corporation Tax7. Receive confirmation pin from HMRC in the post8. Enter pin into HMRC to finalise enrolment9. Repeat steps 6-8 for PAYE (if applicable)
1Unique Taxpayer Reference
Step 4 – Keeping AccountsOptional guidelines are in Financial Reporting
Standard for Smaller Entities (FRSSE), effective April 2008
Make a spreadsheet to track everything at the beginning!
Update it as you go along!
Use my simple template
ACCOUNTING PERIODYear 2013 2013 2013 2014 Year TotalQuarter 1 2 3 4From 06/04/13 06/07/13 06/10/13 01/01/14 06/04/13To 05/07/13 05/10/13 05/01/13 05/04/14 05/04/14
TURNOVERDevelopment Services £0.00 £0.00 £0.00 £2,000.00 £2,000.00Total turnover £0.00 £0.00 £0.00 £2,000.00 £2,000.00
COST OF SALES £0.00 £0.00 £0.00 £0.00 £0.00GROSS PROFIT OR LOSS £0.00 £0.00 £0.00 £2,000.00 £2,000.00
DISTRIBUTION COSTSTravel £0.00 £0.00 £0.00 £50.00 £50.00
Total distribution costs £0.00 £0.00 £0.00 £50.00 £50.00
Income StatementTwice Circled Ltd.
Step 5 – Paying yourselfOption 1 – Dividends and more dividends!
Pay 20% corporation tax on everything. Pay additional 25% on any dividends beyond
£32,010 (before tax)
Option 2 – Tax free salary + Dividends Pay 0% on your salary up to £7696 (2013/14 Secondary
Threshold) Pay 20% corporation tax on everything above £7696 Pay additional 25% on any dividends beyond
£32,010 (before tax, including the £7696 salary)
PROFIT = GOOD!
WRONG!
Corporation tax is proportional to profit!
Quick recap:
Standard expensesThings your company pays for directly:
Salaries Rent Utilities Etc.
Step 6 - Expenditure
Reimburseable expensesBut wait! Only certain items can be reimbursed by
your company as business expenses, see 480 and 490.Key notes:
Business mileage in your own car can be reimbursed (without receipt) at 45p per mile (< 10000 miles)
Keep a record of every trip you make though Receipted travel and subsistence (hotels, trains) have to
declared on form p11d and self-assessment. Excellent explanation.
Get a dispensation to avoid the hassle. However for both of these you need to register your
company for PAYE.
Step 6 – Expenditure (2)
When you buy equipment your company does not incur a loss
Appears as asset on balance sheetHence, does not reduce corporation tax
liabilityAnnual Investment Allowance (AIA) for capital
expenditure: Equipment Software
£250000 for 2013/14
Step 6 – Expenditure (3)
Step 7 – Corporation Tax ReturnDecide on your company’s tax yearLogin to Companies House and change your company’s
accounting period to line up with your tax yearWait until the company’s tax year has finished…Login to HMRC and file your corporation tax return –
you will have an option to change the dates!Follow the process through and download form CT600Use the Joint Filing service to do your Company
Accounts simultaneouslyYour spreadsheet should have all the numbers you
need to complete the formSettle up the corporation tax due 9 months later
“I’m going to do my own accounts!”
Questions?
Presented by Tim Wicksteed
www.twicecircled.com@twicecircled
Slides available at: http://www.twicecircled.com/resources/tools/accounting/accounting_for_freelancers.pptx