While some might find the UK’s tax collection mechanism a bit complicated, the system collects an incredible amount of tax every year. For 2020–2021, the HMRC claimed to have collected £556 billion, with almost 70% of it coming in from income tax returns.
One of the most flexible work niches of the present times, freelancing offers incredible freedom and a sense of better work engagement than other occupations. With great freedom, freelancers also have to demonstrate great responsibility. Like all other earning individuals, freelancers are also required to pay a set amount of tax. As a freelancer, your tax returns would not include allowable expenses, just like self-employed individuals. Since your income tax will be a personal declaration, you will go the SATR, Self-assessment tax return, route.
Self-assessment tax returns are for people who work as independent earners or don’t fall into the conventional route of sole traders, limited companies or partnership ventures. The HMRC (Her Majesty’s Revenue and Customs) holds the independent earner/ freelancer responsible if they don’t pay their taxes annually. The concept is fairly simple. A tax-paying freelancer will become eligible to benefit from the relief the government offers taxpayers.
Book tax accountants in London to help you prepare and submit tax returns for your freelancing projects. Business tax accountants also remain in correspondence with the HMRC.
How Much Tax Does a Freelancer Pay?
The tax you pay isn’t levied on your personal allowance, which can be around £12,000 a year. You can apply for more allowance if you deal with a disability/disease. The tax rate begins at 20% if your annual income falls between £12,571 to £50,270.
To check out the income tax band, click here.
Here are a few pointers you should pay heed to before the closing of the tax season each year (April 5th).
Stay Organised the Whole Year Round
That copy of the invoice you never cared about is important in calculating your income tax. You should have all your invoices, bills and payment record fairly sorted. They are ways your tax can be mitigated. This will require you to have the complete documents of all business transactions with you.
Don’t Miss the SATR Deadlines
The HMRC will need to be told about your tax filing. You should register for your preferred tax return route with the government. For the SATR route, October 5th is the deadline.
Register Yourself Under a Business Structure
You should choose one of the three business structures for your business. The HMRC taxes individuals not on the job type but based on their business structure.
Our chartered tax advisors in London can help you with your taxes. Contact us here.
IBISS & Co. is a team of chartered accountants and business advisors based in London. We offer tax accountant consultation in London and handle multiple tax return types, including property tax, VAT, landlord tax and more! To inquire about our services, call our head office: 0203 808 0999.