After the fantastic response from my previous blogging tax and income related post, I felt I needed a follow up post, this time from an expert…
I’ve spotted quite a few of my blogging buddies talking about the stress they’re under at the moment in filing their tax returns. It’s no secret that a large number of bloggers that you probably read on a regular basis, work full time on their blogs and therefore earn an income through that. This therefore requires them to file their own tax returns in January, so all their books are up to date, but for most it’s an annual dreaded ordeal. When I decided to go full time as a blogger, I also decided that I didn’t want to get anything wrong and would rather pass the important stuff over to someone who really knows what they’re doing. Thats why I hired Sarah as my accountant and I am so glad I did. Therefore, after so many of you were interested in my previous tax advice post, I thought it would be useful to hear from an actual accountant on the whole matter, and therefore my wonderful accountant Sarah has written todays guest post! Please do leave comments below and we can all get discussing and helping each other on this rather complex topic…
For many of us it’s very important that we understand how much money we have in the bank, what we are expecting to receive in and what we have to pay out. We can usually predict quite closely how much we will be receiving but it’s human nature to be more optimistic about how much we will have to pay out!
The annual tax bill can be one of those payments which we tend to under-estimate. If we follow some simple rules I believe we should be able to reduce the chance of any nasty tax surprises.
1. Find a good accounting system
Look at your current system; is it giving you what you need? Can you clearly see how much money you’re making…or not making? Is it easy for you to understand? If the answer to any of these questions is no then it’s likely you’ll need to change your systems.
Speak to friends and other bloggers, what do they use and would they recommend it? If you have an accountant they should be able to give you some advice on the right accounting system for you. Do not assume that a good system will come with a cost, it can be a simple spreadsheet. Checking back through your bank statements rather than just receipts is also a much easier way to spot your expenses and outgoings.
2. Use it!
Once you have a good accounting system the next step is to use it and use it regularly. Set yourself sometime in the diary. Update all the information into your system and file away receipts and remittance advices. File on-line invoices into a safe and secure place on your system and back-up regularly. The more you update your records the more you’ll understand it and you may even find you enjoy it….yes, I mean it!
3. Bank balance is king
When I prepare either my own accounts, or the accounts of my clients, the first job is making sure the bank account reconciles. All ‘reconciles’ means is that you have recorded all the bank transactions and the sum of these agrees back to the bank statement. If you have done this then you will have confidence that costs and income have been recorded.
My other tip on this subject is to have a separate business bank account and credit card (if you use one). Not only is it best practice it will make your life so much easier when you come to recording your numbers.
4. Check your costs are reasonable?
There is no need to fear a tax inspection if you have kept good records which; you can refer back to and you can justify the costs which you have claimed for. The UK has the most complicated tax system globally and the worriers amongst us can get bogged down in the minutiae. To keep your life simple you should just ask yourself is the cost for the sole purpose of earning profits for my business. If it is then it’s likely that it’s allowable. As examples, if you use your phone for work, then you can claim it back. Plus, the expenses for upkeeping your hairstyle, heating your home office, buying the newest Chanel mascara to review on your blog.
5. Talk to your accountant
Make full use of your accountant’s skills and expertise. They will be happy to help you and if they don’t know the answer they should go away and find out. I hint earlier at our complex tax system which is ever changing. You are unlikely to have the time to keep on top of changes so speak to your accountant – get value out of your accountancy fee.
Do get in touch below with any comments, ideas or questions. I’d love to hear your thoughts.
Some of these items may have been sent to me for review. Please see my disclaimer for more information