Do freelancers need an accountant?
Needing an accountant is not really a matter of how much or how little you earn; instead, it is a matter of what kind of business you run.
The government provides some useful information on the things you need to do if you have freelance earnings; unfortunately, it has nothing to say about whether you should use an accountant, so we have compiled a quick guide to help you decide whether this would be in your best interests.
Do you buy equipment, stock or vehicles?
The rules around the way you can offset the costs of capital investment in equipment are quite complex and subject to change in the budget. The chancellor sometimes encourages small businesses to invest, but then the tax people (HMRC) impose a lot of complicated rules around what you can or can’t claim against tax.
If you have a business of this kind, you are likely to need an accountant who knows the regulations inside out. The good thing is that you are also the type of business most likely to be able to save money by using Cheltenham accountants such as www.randall-payne.co.uk, as they will be able to point out the allowances you could benefit from.
Do you have a loan or finance agreement?
Again, these can cause complications, especially where a vehicle is part-used for business purposes, part-used for personal travel, and also has a finance agreement. If you answered ‘yes’ to the last question and to this one, an accountant will ensure that you don’t accidentally get into trouble with HMRC.
Do you trade as a limited company?
Many freelancers have a personal service company, which are still common in the IT and entertainment industries, amongst others. HMRC is pretty hot on whether these companies are being used to pay less tax (IR35).
In addition, any limited company has to formulate its accounts correctly. If you are trading as a limited company, you have two options: to become an amateur accountant yourself or to stick to your main business and get a professional to do your accounts.
If you answered ‘no’ to the questions above and simply issue a couple of invoices every month, you may well be able to do your own accounts. Just make sure you meet the HMRC deadlines for self-assessment!