Five tips to make tax season easier next year
Tax season often feels like an impending storm cloud for the self-employed, freelancers, business owners, or anyone juggling a side hustle.
With the deadline for submitting tax returns (31 January) already in the rearview mirror, it’s time to focus on how you can stay ahead of the game this year and make sure your next tax season doesn’t send you into a panic.
The good news is that a little organisation, some smart tools, and a touch of productivity magic can turn tax season from a dreaded upheaval into smooth sailing. In fact, by preparing in advance and staying on top of things, you’ll find that your next self-assessment tax return doesn’t have to be stressful at all.
To help you, Reena Cruz, a PDF Productivity Expert at Xodo, a comprehensive PDF and document management platform, explains her top five tips on how to have a zen-like tax season experience come next January.
1) Track your income and expenses regularly
It’s easy to let paperwork slip through the cracks when you’re juggling clients, projects, and deadlines. But regular tracking is key to making sure you don’t get overwhelmed when it’s time to file your taxes.
Start by dedicating a little time each week to go through your income and expenses. This can be as simple as logging your earnings and business costs, including purchases for supplies, travel expenses, and any other deductibles. (You can steal our free template here.)
All this documentation will help immensely once tax season rolls around. Consider setting up a monthly reminder on your phone or calendar to help you stay consistent.
2) Make the most of productivity tools
There’s no need to reinvent the wheel when organising your taxes. Plenty of productivity tools, like accounting software or apps designed to track your spending, can help you stay on top of your finances.
Using cloud-based software helps you keep track of your invoices and receipts, and keeps you protected from any crashes or hardware failures. Many of these cloud-based services also offer features that help you categorise your income and expenses for easy reference come tax time. A lot of these tools can also integrate with your bank account, making them even more powerful!
If you want to store and organise all your tax paperwork in one place, Xodo Web provides a seamless way to manage and access documents across devices. Alternatively, if you prefer 100% offline work, Xodo PDF Studio (desktop app) allows you to securely edit, annotate, and store all your files without needing an internet connection.
3) Don’t hesitate to seek professional help
It’s tempting to DIY your taxes, especially if you’ve been filing on your own for years. But the reality is, taxes can be complex, and if you’re not confident in your understanding of tax laws, it can lead to costly mistakes.
If you’ve had a major life change (such as starting a new business or expanding your side hustle) or you’re simply feeling overwhelmed, it’s worth seeking help from a professional accountant. They can help you navigate the intricacies of self-assessment, claim eligible deductions, and make sure that you stay compliant with the HMRC’s requirements.
Many accountants also offer services tailored to freelancers and small business owners, so don’t hesitate to book a consultation to get expert advice. You might be surprised how much easier it makes the process – and how much time you’ll save in the long run.
4) Stay on top of deadlines
Missing deadlines is one of the most stressful parts of tax season, but it’s easily avoidable with a little planning. For self-employed individuals in the UK, the deadline for filing your online self-assessment tax return is at midnight on the 31st of January, following the end of the tax year. This is also the deadline for paying any tax you owe.
Add these dates to your calendar well in advance and set reminders for yourself so you don’t forget. Additionally, if you are liable for paying a payment on account, you’ll need to keep track of that as well.
For your peace of mind, it’s a good idea to prepare everything ahead of time, even if you don’t plan to file until the final deadline. This way, you’re not caught scrambling at the last minute.
5) Set aside enough tax funds
One of the biggest challenges for self-employed individuals is setting aside enough money for taxes. It’s easy to get caught up in the day-to-day of running a business and forget to save for taxes, but this can catch you out and leave you without enough funds to pay your bill!
A good rule of thumb is to set aside around 25-30% of your monthly income for taxes, but this will depend on your income and allowable expenses. You can keep this tax fund in a separate savings account so that you don’t spend it by accident. By regularly saving and budgeting for taxes, you’ll avoid the panic of needing to come up with a large sum of money all at once when your tax bill is due.
Be prepared for an easier tax season next year
One often-overlooked aspect of preparing for tax season is choosing the right business structure. Whether you operate as a sole trader, partnership, or limited company can have significant tax implications. For both those just starting out and those who’ve been in business for a long time, it’s a good idea to get professional advice on whether your current structure is the most tax-efficient.
Self-employed individuals also often overlook the impact of VAT and other taxes that can apply depending on their earnings or business activities. If you’re registered for VAT, staying on top of your VAT returns is crucial.
Many businesses struggle with the paperwork and accounting associated with VAT, but taking a proactive approach by regularly reviewing your VAT records means you won’t face last-minute headaches when it’s time to file. Similarly, understanding whether you need to pay Class 2 and Class 4 National Insurance contributions is very important, as these can vary based on your profits.
Xodo is a comprehensive PDF and document management platform designed to enhance productivity and accessibility across devices. The platform offers a suite of tools for viewing, editing, annotating, and signing PDF documents, making it ideal for both individual users and businesses.
