2013 Tax facts – What Should Freelance Designers be Aware of?

A guest post by Mark James who currently works in-house for small business accountants Crunch

small business tax
Photo credit: Alan Cleaver

As I wrote a few months back, tax is taxing, mainly as it’s so tricky to keep track of, government after government fiddling with legislation. HMRC aren’t too helpful either, continually complicating matters by ushering in new schemes.

This year’s no different and it promises to be one of the most tumultuous on the tax front. Come April 6th, swathes of changes are set to be unfurled and they could have varying implications for the freelance designer, impacting upon their earnings and the way they do their accounting.

What then, should the freelance designer look out for and what will they have to do to comply?

Firstly,  get to grips with Real Time Information (RTI)

Something that might have accounting implications is the introduction of RTI, which will only affect freelance designers running a PAYE scheme. Generally, that’s limited company freelancers rather than sole traders.

Regardless of your business structure though, just bear in mind that if you’re operating PAYE you will need to comply with RTI.

So what exactly is it? Well at its crux, RTI is a new scheme built to streamline the flow of payroll information between employers and HMRC, designed to ensure that the payroll information HMRC holds for your company is as up-to-date as possible.

This will be achieved by getting companies to submit records on or before every payday instead of once a year. So for those operating PAYE this means that every time you draw a salary you must notify HMRC, either through a piece of compliant payroll software or by using HMRC’s Basic PAYE tools.

If you’ve got an accountant, have a chat with them to ensure that either they’ve got – or can at least point you towards – the appropriate payroll software. That way you’ll avoid any nasty fines, as well as HMRC’s clunky software.

Legislate for the rate and threshold changes

Every April 6th ushers in a few rate and threshold changes, and this year, there’s more than most. Amongst those most likely to impact upon freelance designers are…

  • a rise in the Personal Allowance to £9,440
  • a drop in the Higher Rate threshold to £32,010
  • and a lowering of the Additional Rate from 50% to 45%

These will have varying implications depending on your financial position, so start by examining that and then try to determine how the above might impact upon you.

Keep in mind Universal Credit

The introduction of the Universal Credit is something that’s worth bearing in mind if you receive Income Support, Working Tax Credits or Child Tax Credits. If this is you, then your payments will be changing in line with its arrival.

The usual parliamentary toing and froing makes it hard to decipher whether its introduction is a good or a bad thing, but you can get a basic overview of just what this new piece of legislation means here.

Hopefully that was all pretty clear. Of 2013’s incoming legislation, these changes are likely to affect freelance designers the most. Make sure you’ve taken the right precautions to avoid any fines and that you take the right steps to achieve optimum tax-efficiency…2013 might then be a little more profitable!

A Finance and Business Writer, Mark James currently works in-house for small business accountants Crunch. You can find him on Twitter @MarkJames891.

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9 Comments

  1. Posted March 20, 2013 at 7:58 pm | Permalink

    Thank God these tax rules are not the same in my country. Best of luck for you guys :)

  2. Posted March 23, 2013 at 5:12 pm | Permalink

    I loathe this stuff and Ive had a bad experience with an accountant in the past. I run a ltd company and vat registered but I only really started in November – before that I worked as a sole trader. I’ve recently started using an online accountancy company called Crunch, look them up, their site is beautiful Everything is online and they have android and iphone apps so you can take an image of a receipt and upload directly from your phone. Honestly Tara, it’s a godsend.

    Thanks for the info on RTI, I knew there was something going on but I’ve been burying my head in the sand :)

  3. Posted March 23, 2013 at 5:15 pm | Permalink

    Oh, I’ve just noticed that this post was a guest post from someone at Crunch! Small world. I guess you have seen their beautiful site then! Lovely simple logo and site, so clean and refreshing.

  4. Posted April 2, 2013 at 12:27 pm | Permalink

    Nice post Mark. Yes one of the worst things about running your own business is the larger than expected tax bill!

    It is a shame that so many people have to invest so much time into organising and doing things in a way that suits the government rather than being able to focus on the task of actually running their business but I guess the system has to work somehow.

    Somebody should build an app that takes care of the whole thing! That way designers could spend more time designing and less time going through the soul destroying tax forms and changing regulations.

  5. Posted April 10, 2013 at 1:55 am | Permalink

    Like Jo, I’m dreading the time when this time comes. Luckily, I still have a good amount of months before it even becomes a consideration. Thanks for the article – gives me a solid schema for when doomsday cometh.

  6. Posted April 16, 2013 at 10:33 am | Permalink

    Somebody should build an app that takes care of the whole thing! That way designers could spend more time designing and less time going through the soul destroying tax forms and changing regulations.

  7. Posted April 18, 2013 at 12:35 pm | Permalink

    One change I’d like to see implemented – a better interface on the HMRC website for submitting accounts!

    With no obvious calls to action and a sea of subtle underlined links across the page, it wouldn’t surprise me if it puts people off submitting a return at all!

  8. Posted May 6, 2013 at 8:07 am | Permalink

    Anyone else having a shocking experience with HMRC over this? It’s early day but I’m thinking of going back to sole trader.

  9. Posted May 9, 2013 at 1:07 pm | Permalink

    thanks for explaining it in a detail. i am a designers did not ever think of these facts ever before.

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