4 Habits Every Freelancer Should Adopt This Tax Year
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Tax advice
6
April 2022

4 Habits Every Freelancer Should Adopt This Tax Year

Whilst the tax return for work you’re doing now may not be due for months, the beginning of the new tax year is the perfect time to build good tax habits. So, in this blog, we’ve outlined four ways you can make this tax year the easiest yet.

Hannah Watkins
Hannah Watkins
Content & Campaigns Lead at Coconut
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As you may know, the new tax year starts on 6th April. And whilst the tax return for work you’re doing now won’t be due until 31st January 2024, the beginning of the new tax year is a ‘clean slate’ of sorts—making it the perfect time to build good tax habits.

Because while no one loves doing their tax return, putting off key admin tasks until the last minute will just make the process even more long-winded and stressful than it has to be.

But in just a few minutes a day, you can get exceptionally organised with your finances—so that when the time comes, doing your Self Assessment will be an absolute breeze. That means:

  • No more ‘January panic’
  • No more unexpected tax bills
  • No more scrambling for year-old receipts

And remember: when Making Tax Digital comes into effect in 2024, you’ll need to submit four tax submissions a year instead of one…so getting into good habits now will definitely pay off later.

Four good habits for the new tax year

So what do we mean by “good tax habits”?

Below, we’ve listed four practices that you can build into your routine this tax year, that’ll help you get organised, free up your precious time, and build the foundations you need for your business to thrive:

  1. Sort your transactions as you go
  2. Track your invoices regularly
  3. Always know how much tax you owe
  4. Work with an accountant

These habits are doable whether you use Coconut or not—though we will say that Coconut makes each of them super easy. In each section, we’ve highlighted how our bookkeeping and tax tools will make building and maintaining each habit a real doddle.

Not yet a Coconut user? Download our app now and try it free for 30 days!

So without further ado—let’s get started!

1. Sort your transactions as you go

When you’re doing a tax return, the income and outgoings that you’re reporting could have occurred months ago—sometimes even over a year ago. Which makes those niggly details pretty hard to recall.

But once you get into the habit of sorting your transactions as you go, you won’t have to worry about remembering what year-old receipts are for when you do your Self Assessment.

New tax year habit: 

Every time you spend something for work, write it down—it’ll only take a few seconds at the time, but will save you hours when it comes to doing your tax return. 

You’ll need to record the following details:

  • the amount you spent
  • when you spent it, and
  • what it was for. 

You should also save all of your receipts in a safe place—ideally digitally, so that they’re safely stored on the cloud. And if you’re VAT-registered, you’ll need the VAT breakdown on your transactions, too.

How Coconut can help:

Once you’ve connected a bank account to Coconut, you’ll be able to see all of your transactions—across all of your accounts—in the app, as they happen. 

This makes it really easy for you to:

  • specify which transactions were for business (rather than personal)
  • categorise your expenses,
  • scan receipts with your phone and add them to transactions, and
  • jot down notes to help jog your memory later.

Coconut also makes it easy for you to split transactions that are part-business, part-personal—and if you categorise one transaction, we’ll look for other similar ones and make it easy for you to apply the same changes, all in one go.

2. Track your invoices regularly

We all like getting paid. But as a self-employed person, you’re probably no stranger to chasing clients for payments, searching for lost invoices, and manually matching invoices with incoming transactions.

New tax year habit:

This tax year, get into a regular rhythm of chasing late invoices, to ensure you get paid on time, every time.

To do this, we recommend setting aside a specific time each week or month to:

  • make a list of all of the work you need to bill for that month
  • create and send all of those invoices to your clients
  • do a final pass to double check there’s no work that you haven’t billed for
  • check which of your previous invoices have been paid (and tick them off your list)
  • identify any invoices that are overdue
  • chase those outstanding invoices.

Of course, if a client is late paying you, that’s on them—not you. But they’re much less likely to always be late once you have a system in place to chase them.

How Coconut can help:

Did you know that you can create, send, and track invoices in a couple of taps…all within the Coconut app?

With our handy invoicing tool, it’s easy to:

  • create personalised invoices in literally seconds, 
  • send invoices to clients on your mobile—either via email, text, or by saving them as PDFs
  • see when invoices are either paid or overdue (we’ll mark them for you automatically)

And if you have your notifications turned on, we’ll also let you know as soon as you get paid—so you won’t have to keep checking your bank account for new payments.

Download Coconut now

3. Always know how much tax you owe 

Wouldn’t it be great if you could be sure that you’d always set enough money aside for tax, and never worry about being caught out by a surprise tax bill? 

New tax year habit:

If you’re following steps one and two—sorting your transactions and ensuring your invoices get paid on a regular basis—it’ll be so much easier to keep an eye on the amount of tax you owe, year-round. 

We recommend earmarking some time in your diary, around once a month, to check how much tax you owe for the tax year to date—and set that money aside. Doing this regularly will ensure you’ve always got enough saved by the time your tax bill is due.

How Coconut can help: 

Doing this is super easy when you use the Coconut app: once you’ve categorised your transactions and sorted out your income, we’ll automatically provide you with a tax estimate in the Tax tab—so you know just how much to set aside.

And if that weren’t enough, when you get closer to the Self Assessment deadline, you’ll be able to take those numbers from your Tax tab and plug them into the tax return form—making the tax return process a whole lot easier. 

Get started with Coconut

4. Work with an accountant

Our final top tip for you is all about working with an accountant

New tax year habit:

Having an accountant is valuable beyond just compliance and tax planning—it’s about having someone by your side with the experience to help you make the big decisions and build a better business.

If you don't yet have an accountant, but are wondering whether it's time for you to get one, check out this handy guide.

How Coconut can help:

If you have an accountant already, you can invite them to Coconut through the app—once your accountant has accepted your invitation, they’ll be able to view all of your business activity and bookkeeping data whenever they need to, via the Partner Portal.

Meaning no endless back-and-forth emails, no frantic searching for receipts, and no stress—for you or your accountant.

In summary

And that’s all! Four habits that are sure to make this tax year the easiest yet. Here’s a recap:

  • Keep an eye on your incoming and outgoing transactions, and make sure you keep a record of them.
  • Devote time each week/month to sending your invoices—marking those which have been paid and chasing those that are overdue. 
  • Regularly check your tax estimate and set aside enough money for it, so you’ll never be caught out by a tax bill.
  • Consider getting an accountant, who can help you feel reassured that you’re doing things right.

And of course, you can use the Coconut app to make all of the above much faster, and save both time and your sanity!

By adopting these habits, we can guarantee you’ll feel significantly more organised and in control of your finances, so that when tax season comes around, you sail right through it—wondering what it was you ever found difficult in the past.

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