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Your freelance accountancy questions answered

Martin Brooks

Accountant Martin Brooks shares some of his top tips for freelancers on managing their finances.

Martin set up Goldstag Accounts in 2017 when he leapt from industry to self-employment. Even though he had a young family, he knew the time was right and wanted to take a more modern approach to accounting than the company he was working for was offering.

After dabbling with various types of clients, he decided that working with freelancers and small businesses were the most enjoyable. Goldstag Accounts now looks after nearly 300 micro clients.

What are the main things freelancers should be considering with regards to their accounts?

It’s all about getting into good habits. For example, using a separate bank account for the business, using software instead of (or as well as) spreadsheets and putting your tax money aside.

Do you see any recurring mistakes?

We see fines for not filing tax returns. We try to step in and help and get them up to date. Initially, some people aren’t very organised, they’re used to winging it, but with a bit of help they can’t believe how easy it is and most are good at becoming organised. They are specialists in their area and don’t know what they don’t know, but just need to be shown the way.

What are the key things to think about when you’re starting out?

Treat yourself as separate from the business. This is even more important as a sole trader. Have a different bank account, put tax money aside and start creating a financial buffer as soon as you can.

For some people becoming limited can change their mindset to see it as a business, not a hobby or side hustle.

What are the key things to think about when you’ve been going a while?

Review your accounts every 6 to 12 months and look at costs like subscriptions. Do you still need the Zoom account you got in lockdown? Review your processes and start using accountancy software if you don’t already; it will save you a lot of time and hassle in the long run. When you’re more established, consider paying into a pension. Also, think about whether your business structure is still right for you.

Sole trader or Ltd?

For some people becoming limited can change their mindset to see it as a business, not a hobby or side hustle. Being limited means you have limited liability, but insurance will also cover you if you’ve got it. Once your profit is over £30k, it’s tax-efficient to go limited, and most people switch because they want to save money.

What’s your advice for making more money and growing?

The main advice would be to see it and treat it as a business. Freelancers tend to outsource and subcontract to grow. Most know other people who do the same thing, and it can be an excellent way to scale without employing people.

What if I’m thinking of getting a mortgage?

If you’re thinking of becoming limited or changing your business structure, make sure you time it right. You’ll need a couple of years of books verifying your income. It’s always a good idea to get a mortgage advisor who specialises in self-employment.

Do I need to register for VAT?

You don’t need to register until your turnover is over £85k. It’s always good to know where you’re at to see if you’re close to the threshold. Different schemes might benefit you depending on your circumstances, and an accountant can advise you on that.

This article was originally published in Freelancer Magazine Issue 2. Get Freelancer Magazine delivered to your door or inbox.

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