Sunday, 17 August 2014

Let's Talk About Tax

This week I tuned in for an IdeasTap webinar about the mysterious "Big T", aka the tax man. Listening avidly from the bus on the way home from work, Tax Talk For Freelancers was delivered by Alistair of Bambridge Accountants and was packed with useful nuggets of golden info for independent creative business folk.

All this bookkeeping financial stuff is definitely a topic which makes more sense to me when somebody vocalises it, as letting myself pour over guidelines and terms can create more questions that answers. After just over a year as a sole-trader and having submitted one fairly straightforward initial tax return, things had naturally gone up a notch and I wanted to get more savvy about record keeping and good financial practice; something that can be hard to come by as a free resource and even harder to digest.

The session was incredibly useful, and tied up some loose ends for me in terms of things that may or may not be expenses, how really to calculate the use of your bedroom as an office, and whether some of the more enjoyable parts of the illustration lifestyle can be considered work.

Here are the top 5 things that I learned:

- Postgraduate Study Is Business Training. As a sole trader, training counts as a business expense as long as it is within your existing field, and this includes studying for a masters. For limited companies this goes even further, and you can offset against broadening your company's offering through training ie. a course of study to give you brand new additional skills rather than just furthering ones you already have.

- Eating & Drinking Not Wining & Dining. You can claim for your own train, bus, air and taxi fares; hotel room costs and meals on trips to meet clients, but you cannot claim for "entertaining". I also found making the following distinction useful: expenses can only be claimed if the intention for the visit is to make money from it along the way, and so excludes meeting friends / collaborators for a creative catch-up.

- Bedroom As Business Premises. Discount your bathroom and hallway when counting how many rooms your house has. Divide all costs on your property by the number of rooms, including mortgage or rent, council tax, insurance, utility bills. Then work out what percentage of your time in that room (ie. bedroom) is used for your business, and divide the room total accordingly to give your self-employed working-from-home claim total. For example if you work 8 hours a day from your room divide by 3. Et voilà! You can also divide up personal / business use for things like your mobile phone bill and laptop.

- International Clients. If you have received payments in different currencies, you can retroactively find out the conversion rate on the day it was paid and accurately convert it to £ using a cheeky little site called Oanda.

- Research Is Fun. Subscription to trade journals or relevant magazines are an allowable expense. This also applies to researching your industry and keeping up to date in other ways i.e. film-makers can claim for visits to the cinema and even netflicks.

For more info on expenses and allowances check out the fact sheet from HMRC, and to register for future IdeasTap spa events visit: