LITRG’s five tax tips for low income self-employed
- We strongly recommend that you understand your employment or self employment status before you start work because if you are self-employed you will have no entitlement to any employment rights, which include rights like paid holidays and sick leave; and you will have to take full responsibility for your tax affairs.
- It is very important that you keep personal transactions (such as drawings) separate from your business transactions – although this does not necessarily mean that you need to have a separate business bank account (depending on your bank’s terms and conditions).
- If you want to keep things simple use an accounting date of either 31 March (if you prefer to work in whole months) or 5 April so it matches the tax year.
- It can be quite a shock to your cash flow when you first move to payments on account. It may help you to put a certain amount each time you are paid into a different bank account. Remember you will need to save an additional amount for the first time you move into the payments on account system as you will be starting to pay your tax earlier.
- Do not forget to notify HMRC (for tax credits), DWP (for universal credit and other means-tested benefits) or your local authority (for housing benefit and council tax reduction schemes) if you have stopped being self-employed.
By Low Incomes Tax Reform Group