What every work from home mum needs to know about taxes

Image courtesy of the everygirl.com 

 

When running a business, it’s easy to ignore your accounting obligations. There are so many other demands on your attention after the fundamental jobs have been done like keeping your children fed, watered and out of trouble. But if you want to minimise stress and the time you spend on your accounts, there are many simple ways to keep organised.

You are legally obligated to keep records of all your company’s incomings, outgoings, debts and assets. Keep everything for seven years, away from sticky fingers. Your profits are your income less expenses. Don’t be fooled by this calculation’s apparent simplicity, or be daunted by its hidden complexity. Your toddler couldn’t handle it, but your spotty teen could be proficient in a day.

Take ten minutes to understand which expenses are allowable, and forever feel more confident. Most small businesses overpay tax because they aren’t familiar with these. HMRC has a simple guide to the essentials. Tattoo this on your youngest’s forehead: lower profits = lower tax.

Get some files for your receipts, invoices and statements, with separate slots for different types of income and expense. Have a look at a profit and loss sheet for help with how to label your sections. File paperwork as soon as possible. You should create a similar file on your computer for emailed records. Don’t panic if you lose something; bank statements are adequate proof when original paperwork is missing.

There are many ways to handle all of this data. You can whack it all in a bin liner and dump it with your accountant, set up a basic profit and loss spreadsheet (free templates are readily available), or embrace an accounting software package. Some allow you to input data on the fly via your mobile phone, and even log receipts by taking a photo. If you know you aren’t going to log things as they come in, set yourself a time once a week to ensure all of your records are up to date.

You may have heard HMRC are launching a new online service. Taxpayers will have individual accounts holding all of their tax information, which will be pre-populated with information already held by HMRC, and from selected third-parties such as banks. You will be able to log details in real time, and pay as you go. This should make things easier, but you will still have to check everything.

If you keep on top of your accounts, you will feel a lot calmer, but you will also have an opportunity. Analyse your data in terms of your recurring expenses and costs of production, where your income is strongest and weakest. Examine how new leads come in. Research competitors, read business blogs, get involved in your local entrepreneurial community. If you do all of this, you’ll be able to turn your boring old accounts into a toolkit for business success.

Bonus Tax Tips for Mums

  • Outsource to the in-laws! Relatives providing free childcare can claim tax credits towards their state pension.
  • Be generous. Interest on your children’s savings is tax free, so long as they do not earn more than £100 in interest per parent benefactor.
  • Embrace child labour! From thirteen, you can employ your children, and don’t have to pay minimum wage. Their tax-free personal income allowance is the same as yours.
  • If you want to take a course, full-time students with children are eligible for Parents’ Learning Allowance, currently at £1,573 (2015).
  • The Job Centre pays maternity pay to all freelancers, but if you own your own business you’ll have to negotiate with yourself. If you go back to work in under thirty-nine weeks, paternity pay and leave may be eligible for extension.

Credit for this article goes to Natalie Butlin from Accounts and Legal. For all tax and accounting advice, get in touch.

Accounts and Legal are an innovative full-service accounting firm based in London, specialising in start-ups and small business. Mums in business appreciate their flexibility and approachability. They tailor packages and prices to each individual client, offering everything from bookkeeping to financial forecasting. Growth is their central focus and business consultants can pick up where the accounting team finishes, benchmarking clients’ performances against their competitors’, and offering budgeting and cashflow services. Dedication and entrepreneurial spirit has seen them support many firms from the kernel of an idea to profitable companies.