For freelancers and sole traders, tax isn’t a once-a-year job. It’s something that affects cash flow and decision-making all year long. Staying organised doesn’t just keep your stress levels down and make tax season easier. It can help you pay the right amount of tax and avoid penalties while feeling more in control of your business finances.
Sounds good, right? Keep reading for our tips and tricks on how you can stay on top of your taxes all year round.
Separate your finances
One of the biggest causes of tax confusion is mixing personal and business spending. Having a dedicated business account makes income easier to track, simplifies expense claims and creates a clear audit trail for HMRC. This is especially important under the new Making Tax Digital rules, coming into force in April.
Record income and expenses as they happen
Waiting until January to sort out your records guarantees stress and mistakes. Instead, try to get into the habit of logging expenses immediately, attaching digital receipts and reviewing your accounts regularly. It might seem like extra effort, but this is where tools like Coconut come in - automatically categorising transactions in real-time so nothing slips through the cracks.
Set money aside
Perhaps you plan to do your tax return, but have you factored in the bill? Throughout the year, try to estimate your tax percentage and move money into a separate savings pot. If you start to treat tax like a non-negotiable bill, it’ll mean you have enough money set aside and will avoid the panic of a large January payment.
Know your tax deadlines
Missing deadlines can be expensive - even if you don’t owe any tax.
Key dates include:
- 31 January for tax return filing & payment
- 31 July for second payment on account (if applicable)
- Quarterly deadlines under Making Tax Digital (this will be rolled out in April)
HMRC does not send reminders, so the responsibility always sits with you.
Understand what you can claim
Another way to stay organised is to know which expenses you can claim to reduce your tax bill. This includes home office costs, phone and internet, software subscriptions and some travel. Keeping a clear record of everything you’ve spent means you won’t miss out.
Review your numbers
Monthly check-ins can help you to spot any cash flow issues, see how profitable you really are and avoid nasty surprises when it comes to tax season. This habit will be especially useful as HMRC moves towards frequent reporting under Making Tax Digital.
Use the right tools
Thankfully, we now have access to modern tax and accounting tools that make the job easier. In fact, tools like Coconut can reduce human error, keep records HMRC-compliant and save hours of admin every year. That’s just the start too. HMRC is even encouraging self-employed professionals to use compatible software, and this is set to become mandatory!
Staying organised for tax isn’t about being perfect. It’s about building small and consistent habits that add up over time. In doing so, your tax return will stop being a source of stress and become another part of running your business well. What’s more, getting organised now puts you one step ahead of the changes coming into play in April.
So, what are you waiting for? See how Coconut can help you today and we guarantee you’ll feel lighter come tax season.
