Going freelance is one of the most popular career choices of this generation. Now, more than ever before, people are choosing to set up a home office and spend their days there. Of course, technology has made this lifechoice more workable than ever before. When you think about it, it’s no wonder that people are making the most of the opportunity. After all, who wouldn’t want to work from the comfort of their home?
But, it would be naive to assume that the freelance route is a solely happy one. While there are obvious benefits to being your own boss, there are major downfalls too. And, never do they make themselves more plain than when tax time comes around. Rather than leaving things to your employer, you have to turn your hand to the ever-nightmarish self-assessment. Worse, you feel every single penny that you lose when you’re doing it.
The good news is, there are a few different ways for freelancers to keep taxes to a minimum. In fact, for the most part, work like this is encouraged. The trouble is, we don’t all know the tricks of the trade and end up paying above the odds. Which is why we’re going to look at a few ways you can keep your taxes down.
Set up as a company
When you first go freelance, the company vs. sole trader situation can get a little confusing. But, to break it down for you, operating as a sole trader means that you’re liable for your enterprise. If you get sued, for example, it all falls on you. And, when it comes to taxes, you’ll be paying from both your salary and your profit.
But, if you set up as a limited company, as outlined on sites like howtostartanllc.org, you stand to gain company tax benefits. Hence, you’ll only need to pay tax on your income. Done right, this could halve the amount you pay out.
Educate yourself about deductions
Any freelancer knows that they have to deduct expenses on their assessment form. But, what less of us realize is just how many deduction opportunities there are. For a full list, head to sites like https://www.upwork.com. Your findings will astound you. Often, you can deduct for using a home office, and even get money off your internet bill. Doing your research is the only way to ensure you’re deducting everything possible.
Keep accurate accounts
Of course, you’ll find it difficult to deduct anything if you don’t keep accurate accounts. Far too often, we end up losing receipts and paying for business supplies from our pockets. With one or two items, it doesn’t seem like a big deal. But, when you consider the cost of those items, plus the tax you could’ve saved, the mistake soon adds up.
Getting your accounting system under control is all it takes. Invest in filing equipment, and make sure to put relevant receipts and bills there as soon as you get them. That way, they’ll be ready and waiting when you come to fill your form.
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