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.