What’s the best way to keep track of your finances?
As a self-employed courier, you get to work to your own schedule and enjoy a great work-life balance. However, it’s easy to put all your time and effort into your work and neglect the financial side of things. Lose track of your expenses, invoices and income, and you’ll find it can cause problems later down the line.
Without a firm grip on your numbers, working out exactly how much tax you owe can be difficult, making your annual Self Assessment tax return process a real headache. If you fail to claim all the business expenses you’re entitled to, you’ll end up overpaying tax, while if you under-declare your income you could face a nasty fine from HMRC.
Make sure you keep accurate records
However you choose to do it, it’s vital to keep an accurate record of your accounts. If HMRC decides it wants to tax a closer look at your tax affairs, you’ll need to hand over your financial records – and if they’re not accurate, complete or readable, you could find yourself in hot water.
Putting aside a small amount of time at the end of each week to update your finances can be a real lifesaver. Many self-employed couriers opt to keep their own records when starting out, such as on a simple spreadsheet. It’s a low-cost method, but not without problems, not least that it’s tricky to get an accurate picture of how much tax you owe. You’ll also need to produce your own invoices, however there are plenty of free invoice templates available online.
An increasingly popular alternative is to use online accounting software. This will help you keep track of all your income and expenses, as well as produce invoices on request. Plus, you’ll always know how much tax you owe and will be able to access your accounts anywhere, anytime. The downsides are that it’s more expensive than the spreadsheet option and if you’re not technically savvy you may need to invest a small amount of time getting used to the software.
Find out what business expenses you can claim
Once you’ve decided how to record your finances, it’s important to get your head around how tax is calculated and what business expenses you can claim.
Many self-employed couriers operate as sole traders as opposed to through a limited company – an accountant will be able to advise which structure is best for you. As a sole trader, you’ll need to pay tax on all profits you make – that’s your total income, minus any allowable business expenses.
It’s therefore key to not only keep a careful record of any money you receive, but also understand exactly what you can and can’t claim as a business expense. General advice on allowable business expenses is available from HMRC, but many sole traders prefer the reassurance of having an accountant on hand to advise them.
Need some help?
If you’re looking for some help with your tax and accounting, Crunch is currently offering Hermes drivers an exclusive discount on its complete online accounting package for sole traders. For just £19.50+VAT per month, you’ll get online accounting software and unlimited access to advice from expert accountants.
Give Crunch a call today on 0330 134 0882 or visit www.crunch.co.uk/hermes.