New Tax Year, New You

As a freelancer or micro-business owner, you happily celebrate two new years: the January Auld Lang Syne shenanigans and the start of a new tax year.

While the latter doesn’t quite hold the same excitement that surrounds the start of a real New Year, it’s worth making some financial resolutions to ensure the 2023/24 tax year is one of your best yet.

As well as this article with handy tips to get this tax year off to a flying start, we’ve got one that summarises all the key changes for the 2023/24 tax year that you need to be aware of.

So, onto our new tax year resolutions we think you should be making.

I will claim all of my expenses

Having a firm understanding of what you can and can’t claim as expenses, whether you’re working as a limited company or as a sole trader when you’re a freelancer or micro-business owner helps you keep your business running and maintain a healthy cashflow.

By knowing your allowable business expenses, you can actively lower your profit. This will, in turn, reduce the amount of tax you pay and increase the amount of money that stays in your pocket. Claiming every single expense you’re entitled to – whether it’s office pens or a new computer – will leave you better off than just paying for them out of your own pocket.

You can claim a wide range of business expenses, including:

• Stationary
• Stamps
• Computers
• Software
• Office equipment
• Work uniform (as long as it carries the company logo – clothing for personal use cannot be claimed, and general business attire cannot be claimed as a uniform expense.)
• Protective work clothing (e.g. eye goggles, if it’s a business necessity)
• Some forms of travel (e.g. journeys that are made for work purposes outside of your normal commute)
• Business mileage

There are also a range of expenses you can claim when you work from home.

If you’re unsure whether something counts as a business expense, check with your accountant or HMRC.

I will be more organised

Let’s be honest, no one really enjoys even thinking about tax, let alone completing Self Assessments and returns. It can be a painful, drawn-out meander through a year’s worth of accounts, bookkeeping and receipts.

However, with a little bit of organisation, thinking about the forthcoming tax year may not seem as daunting, and as business organiser and time management specialist Cory Cook wrote in the Guardian:

“When we’re organised, we think more clearly. We’re in tune with our targets and how to reach them. We have systems in place for carrying out our work – and regular planning ensures we keep priorities at the forefront.”

Maybe you’d find it easier to keep on top of things with great online cloud accounting software.

I’ll keep tabs on dates

Keep forgetting when the Self Assessment deadline is (31st October for paper filing, 31st January for online filing, by the way)? Not sure when you need to file your P11D (6th July)? 

Reach for your tablet or smartphone and get those important financial dates in your diary.

Being fully aware of when these important tax deadlines occur will make the whole process seem more streamlined.

When you’re running a limited company there are also a number of other filing, reporting and payment dates you need to be aware of – we’ve put it all together into our limited company director responsibilities article.

I will pay myself and my employees fairly

If you’ve been freelancing for the previous 12 months, it’s worth going over your books and taking a look at your rates. Were there any projects you worked on that you felt you sold yourself short on?

Making sure you’re getting paid appropriately for your work is imperative, not only to keep your business ticking over, but also your self-worth and motivation in check.

As a micro-business owner, chances are you’re probably already aware of the government’s National Living Wage which entitles all workers aged 23 or over, except those in the first year of an apprenticeship scheme, to at least £10.42 per hour.

As an employer, you need to keep payroll documentation for three years to prove you’re paying the National Living Wage to your employees, should there be an investigation by HMRC.

I will do a brand audit

This will help you to gauge how your business is performing in the eyes of your customers and identify any areas of weakness, which you can then improve throughout the year with a set of savvy corrective strategies. 

Start by brainstorming all of your business processes. For example, evaluate your website’s purpose and use, your main competitors, target market, strengths and weaknesses and anticipated industry trends. You can then examine how you’ve been performing against each area – what is your current web traffic? How do your customers feel about your service? What are the key weaknesses you need to address? 

This evaluation should give you a list of areas that need to be monitored, which will then guide you when devising an action plan.

We’ve got a handy ‘Ultimate business tips business guide’ to help you find ways you could improve your business performance.

I will get better at setting goals

Doing a thorough audit of your business should leave you with a better idea of what goals need to be set for the coming year. Make these goals attainable but don’t undersell yourself – it can be very tempting to set the bar lower for fear that you may not otherwise reach it.

Not reaching your goal isn’t the end of the world. In fact, if you do reach it, it’s very likely it wasn’t high enough. When setting goals, think about where you would ideally like to be by the end of the year. 

Perhaps you want to expand your customer base by 100%. Maybe you need more conversions through your website. Be brave and set your ideal goal – having that high expectation will give you the immediate kick you need.

I will master my paperwork

Do you really need to keep that printout? Do you even need to print something out in the first place? Unless what you’re holding is a receipt or something to do with tax or payroll, chances are you can file it under ‘B’ for ‘bin’.

We’ve launched our amazing Crunch Free bookkeeping software for limited companies or sole traders. It lets you keep on top of all your invoices and expenses and safely store your receipts in the cloud. It even connects securely to your business bank account to import all your transactions to make your next tax return easy. You can use it on any device and if you ever want to upgrade for expert support and advice as well as filing your taxes it’s simple.

If you don’t want to use Crunch Free, then be sure to keep paperwork stored safely and create backups if you can. Google Drive, One Drive from Microsoft, iCloud or Dropbox are all excellent for doing this – they let you photograph documents then store them for easy access and safe-keeping.

As with any new tax year, there have been changes to rules, rates, and allowances. We’ve listed the most important ones in our article Changes for the new tax year from 6th April 2023), but it’s still good to get a head start on the financial year and ensure your business puts its best foot forward.

I will get out more (safely!) and take care of myself

We’ve got a range of tips and ideas in our “Ultimate Health and Wellbeing guide” – it’s amazing how taking a bit of time for yourself can clear the mind and help you focus on your business when you return.

Regularly attending networking events and industry meetups not only provides a welcome change of scenery, but also the opportunity to meet like-minded individuals, promote your business and, hopefully, pull in some new clients.

Our Crunch Chorus community for the self-employed organises meetups in Brighton and London (when global pandemics don’t prevent them!) as well as having a fantastic supportive Facebook group. There are lots of other online and face-to-face groups as well, but If you can’t find something local that interests you, why not set up your own group?

I will get an accountant!

Well, we would suggest this, wouldn’t we! Getting an accountant is a great way to keep on top of your finances. They’ll remind you of important tax dates and payments due, show you ways of keeping your accounts in excellent shape, and advise you on allowable expenses and how to report them so you’re as tax efficient as possible.

They can help you with things like estimating how much tax and NI you’ll need to pay every six months or quarterly for VAT. They’ll also help to ensure you’re not forgetting any payment on account, which catches many people out every year.

New Tax Year, New You – Q&A for limited companies

Q: How should I review my IR35 status as a limited company director and how would I notify HMRC?

A: It can be complicated and you may need a professional to accurately assess your particular situation, but you can use our free IR35 calculator which will assess the risk of your contact being inside of IR35.

Q: Is there a limit of time beyond which expenses can not be paid? And is it a legal requirement to have all receipts?

A: You need to have all your receipts to be able to claim. It’s best practice to claim the expenses when completing the company accounts each year. However, you can amend accounts and corporation tax returns.

For Corporation Tax returns there is a time limit of four years from the end of the Corporation Tax accounting period to which the claim is related.

Q: Do I have to store my receipts in the cupboard or can I just store them electronically?

A: Storing receipts in a cupboard or electronically are both okay, but you must keep them for at least six years in case of an audit. We’d recommend using Crunch Free!

Q: Does it make sense to keep personal and Corporation Tax money aside in a Business Bank Savings Account?

A: Yes it’s a good idea to keep Personal and Corporation Tax aside in a Business Savings Account. When you take money out of a business account there are automatically tax consequences, so keeping money in your business can help reduce your tax exposure.

New Tax Year, New You – Q&A for sole traders

Q: I became a sole trader at the end of January this year. Obviously now we’re beginning a new tax year. Is there anything I need to submit to HMRC for the period between January and now?

A: No, there isn’t anything you need to submit for the period between January and now. You should already have registered as self-employed and you need to register for Self Assessment by 31st October 2021, however, there’s no harm in doing this now. Don’t forget to put money aside for the tax bill and Payment on Account you may need to make.

Q: How much should I put aside if I will pay the higher rate tax? More than 30%?

A: You pay tax on your profits – higher rate income tax rate is 40% and higher rate National Insurance is 2%, so you’ll need to save around 42%. It depends on whether or not you have other income. An accountant will be able to give you a bespoke calculation. Our article on how to pay yourself as a sole trader has more information.

Q: What can I claim for working at home and how do I record this on the Self Assessment?

A: This is rather complex and depends on the size of the property, time spent working in property and actual expenses incurred. We’d advise reading our working from home article and speaking with an accountant who can advise on your personal situation.

Q: What is cash based accounting and how would it benefit me to use it for my financial records?

A: Cash basis accounting is where you account for transactions when you actually incur the expense or receive the cash. This compares to the accrual basis where you account for the transaction based on when the work was completed. You can only use the cash basis if you’re a sole trader with a turnover of less than £150,000.