We all made our diet, fitness, productivity and anything-else-you-can-think-of resolutions in January, as the new calendar year rolled in. However, April brings us a new kind of New Year: the new financial year.
As we covered last month, the Chancellor has revealed his final Budget before the general election and the calendar has officially restarted on the fiscal year. So, what better time to look at some practices every contractor can assume for the benefit of their finances. Here are our five financial resolutions that every freelancer should think about implementing this financial year.
Invest in a good accountant
There are a number of seemingly mundane or everyday things, of which you may not be aware, that can have implications on your tax bill as a contractor. That’s where working with a professional can be of immense benefit to your business. Seeking the advice of a contractor accountant will help you to save money on your taxes and save you the job of having to get your head around the intricacies of HMRC legislation.
Be smart with your accounts
Make sure you set up a separate bank account for your business finances and expenses. This may seem like a no-brainer, but if you’re new to freelancing you may still be using your personal current account. If you need to file your accounts then spending time trying to separate out business transactions from personal ones is time consuming and stressful, especially if you’re pushed for time. A separate account is a fuss-free way to keep your business life distinct.
Get organised with your taxes
We’ve covered, in great detail, how important keeping your tax affairs in order throughout the year is. Despite the fact that the Chancellor has announced his planned abolition of the self-assessment tax return, it still pays to keep yourself organised throughout the year before the time to pay up to the tax man comes around once more.
Our advice would be to squirrel away money from each payment you receive from your contracts. That way, you build up a tax reserve over the year and there are no big, surprise pay-outs come January. If you’re unsure about how much to take out each month, you can look at how much tax you’ve paid over the last couple of years. Work out what percentage this is of your total income for that period and then save that percentage from your monthly income. It always pays to keep your tax liability at the back of your mind throughout the year.
Consider a pension fund
Whether you’re in your twenties and just starting on your freelancing career, or you’re a lifetime contractor looking to the future, saving for your retirement is a financial essential, especially for an independent professional.
Freelancers don’t benefit from auto-enrolment into company pensions schemes. This means that you have to research and find a pension plan that suits your circumstances and lifestyle. A pension isn’t a luxury you can afford to waive for decades. We’ll all retire one day, and you’ll thank your younger self for getting organised as early as possible.
Set up an emergency fund
If you’ve been freelancing for a while, you’re probably familiar with the occasional client that may not pay you on time or unexpected costs, travel or essential repairs to equipment for example. An emergency fund is incredibly helpful in circumstances when you’re cash flow has taken a hit and you need some money to cover your day to day expenses.
The best financial resolution you can make for any new fiscal year is to gain a greater insight and understanding of your business’s finances and to aim for greater financial stability as the year continues.
Do you have any financial resolutions for the new tax year? What are the most useful ways you have found to keep on top of your finances all year round? Share your thoughts with us in the comments below or join the conversation with us on Twitter or our new Facebook page.