As a sole trader, looking after your finances is a tough task even at the best of times. From the ongoing deadlines imposed by Her Majesty’s Revenue and Customs (HMRC) to take into account, to the impact of unstable cash flows, managing self-employed finances is often a bit tricky. But help is at hand – and this article will share some top tips on how to achieve it.
Get a calendar
Going self-employed is the sort of task that many people see as a liberation from the drudgery of the nine-to-five. But while there are plenty of obvious benefits in terms of flexibility, it’s ironically in some ways even more bureaucratic to opt for the freelance route. This is in large part because of the self-assessment tax burden: sole traders pay their own tax rather than relying on a payroll department to do it for them, and this means getting documents and your tax payment to HMRC by a certain date every year. Keeping on top of the dates is a smart move, as it means you’ll avoid some of the fines that HMRC has the power to levy.
Find a specialist accountant
Working as a sole trader is the sort of scenario that requires precise knowledge about a lot of things, however, accountancy will probably not be one of them. That is why employing an accountant is often essential for self-employed individuals. An accountant with lots of corporate clients might not know the same amount about self-employment as a specialist in sole trader accounts is likely to, so it’s worth finding someone who knows their stuff. Not only will a specialist accountant be more likely to add value in terms of navigating the law, they will also usually be able to identify locations where you can save money in terms of allowable expenses.
Accept periods of downtime
Even the most in-demand sole trader needs to be thinking ahead, and no matter what your order book looks like right now it could all change in the future. That’s why building up a cash buffer of some kind to defend yourself against periods in which you don’t have any work coming in is a great idea. It will help you to even out the rough and the smooth, and it will mean you won’t be as inclined to panic. Look on the bright side, too: if you do happen to have a week or two of no work, why not use the time to re-design your website, fill out your tax return or do one of those other jobs you’ve been putting off for so long?
Working as a sole trader brings with it plenty of benefits, but it also has its pitfalls too. One of these is the requirement it places on you to manage your own finances – and with everything from accountancy to the taxman to think about, there’s a lot of pressure. What you can do, however, is take steps to mitigate it – like getting yourself well-organised, or outsourcing some of your record-keeping jobs to a contract-based accountant.