Self Employed Freelancer...do I need an accountant or IFA or both!?

CottageDreamer

Hi all,
Having lurked on this site for a while I have plucked up the courage to try and sort my life out and therefore post a query!

I'll keep it short here....I so many questions....:D

My OH is a self employed freelancer, we have good months and bad months. He's terrible with money so I am going to try and get us on the right track. He does his own tax return and doesn't have an accountant or an Independant Financial Advisor. I really think he should have one or the other or both but am a bit confused.

Does he need both? and does anyone have any tips for finding a reputable and not too expensive one!

Thanks in advance for any help.:)

PlutoinCapricorn

How long has he been a freelancer -I assume that this means sole trader and he doesn't have a limited company or operate through an umbrella company?

Why do you think you need an accountant or IFA? Did you know that HMRC provide free courses on completing tax returns, including what expenses can be claimed?

Are the financial affairs very complicated, with investments and other unearned income, huge sums of money or numbers of transactions involved?

CottageDreamer

Thanks for the quick reply.

You're right, he's not a ltd company or umbrella. I guess I just think that he needs someone who can give him advice on what can and can't be claimed, I hope a professional would be able to sort him out as my attempts have failed and he isnt very open about whats coming in, going out etc.

He has been freelance for 5 years but I don't think he has a business account, all money goes into his personal account. I pay our mobile bills from my account despite him using his for work. There is always a period once a year when we argue as he hasn't put his tax money aside during the year and we have to find £x thousands to pay the tax bill. I have tried nagging, I have tried offering help but now I don't know what else to do.

I hoped if he had proper guidance he would be more sensible and keep things in better order!

I didn't know about the free tax courses, thanks, I think I'll look into it so I understand it a bit more.

We've just had our first child and I guess there is just pat of me that wants to know his business accounts are all in order so we have some chance of ever getting a mortgage, putting money aside for the future etc.

Thanks again for the advice.

PlutoinCapricorn

Ideally, people need to understand what being self employed involves before they even start! This includes the income tax side of things: people who don't want to get involved with all that may not be suitable for being their own bosses! It is important to put aside around 1/3 of what you earn, in readiness for tax bills.

Now, people with huge amounts of money they are not sure what to do with may need an IFA to provide specialised financial advice to help them pay as little tax as possible; people with huge amounts of transactions may need a book-keeper or accountant because they just have not got the time to keep up with it all. They could do it, but they just have not got the time. As people are ultimately responsible for their own tax affairs, it is a good idea for people such as consultants to do it themselves.

Does he invoice clients? Are there good records of income for each year and receipts for items bought? Do you know what percentage of home running costs are used for business purposes? HMRC's website gives examples of legitimate business expenses.

It seems that he may need to go back and check each year to see if correct figures have been given.

Are you willing to say what sort of business he is doing?

Mistral001

The problem seems to be the issue with putting money aside to pay the tax bills.

An old fashioned savings account with building Society might be the answer. get cheque from OH each month and lodge it. He might even thank you for your good common sense.

PlutoinCapricorn

Yes, putting money aside for tax and NI Class 4 is very important.

It seems to me that we have both a somewhat secretive person who has the information but who is not concerned enough with getting the tax return figures correct, and someone who is much more conscientious and who is willing to sort things out, but is not being given enough information!

Using a personal account is not a problem unless they pay cash in or there are so many business transactions that they attract the bank's attention: many consultants use their personal account for payments from their clients. It makes things simpler.

As for what can and can't be claimed: what has he bought that he wouldn't have bought if he hadn't had the business? Does he work at home a lot? If so, he can claim a percentage of running costs. Professional membership, publications, equipment ...

CottageDreamer

Thanks Plutoincapricorn and Mistral001.

You've made me realise that actually Im probably looking for a magic wand to wave and enable me to see and understand all his accounts!

Many, many times I have throughout the year questioned if he is paying his tax as he goes along and many times he has promises have been broken. He does invoice clients and keeps a record of expenses, receipts etc. I really do believe he pays his tax honestly, ie. the right amount and all in order..........just its always right on the deadline. I have tried to hammer home that a percentage of the money coming in isnt actually his to spend!

He's a freelance writer. I think I may try Mistral001's approach and demand to see each payment that comes in and ask for the tax amount to be paid into a seperate account. Generally I think I'll just have to keep on at him.......and ensure I get the correct info as you say!

Maybe I'll think of myself as his accountant / IFA and demand to see his accounts once a month.

He's lovely in real life.....but a head in sand or clouds type where money is concerned unfortunately!

Thanks again for taking the time to reply.

PlutoinCapricorn

Freelance writer - that explains a lot (assuming that this isn't technical writing)!

Your explanation has stopped certain suspicions that I had: I was wondering whether he was trying to hide his affairs from you because he was under declaring income/over claiming for expenses. So now we know it is just that his mind is on other things and the financial side means little to him. I would have thought he would be only too happy to let you take over that side of things for him.

Perhaps you could write a little story for him, about a naughty boy who didn't treat income tax and record keeping with the respect they deserve! There is a big difference between someone who deliberately commits tax evasion and someone who makes mistakes because of not giving their finances the time and attention they deserve, but in either case an HMRC investigation is no fun.

As a writer, he should be claiming expenses for working at home: he may have missed the boat for anything older than 4 years: the deadline has been reduced from 6 years unfortunately.

CottageDreamer

ha ha! thanks PlutoinCapricorn, your story idea is genius!

I'm going to check out the HMRC website tonight as you suggest so that when I do see the accounts / take over running finances I'll know a bit more about it all.

Thanks again, i honestly thought all businesses needed professional help finance wise but now I see they just need their head screwed on!

PlutoinCapricorn

As previously mentioned, a lot depends on the sort of business in question when it comes to deciding whether or not help is needed. The affairs of someone who is buying and selling stock on a large scale are quite different from those of someone who works online and collects a payment from time to time and who does not buy much for the 'business'.

I can't see that a freelance writer would need outside assistance, although he might need some firm encouragement!

As a consultant and researcher, I have always done my own returns, I have a spreadsheet with 3 pages: one for income, which I record on a monthly basis; one for expenses both monthly and sundry, and one for figures ready for transferring into the tax return. I update the figures every month, so always have the latest idea of how much tax will be owed.

There is some useful information on https://www.businesslink.gov.uk

CottageDreamer

Very helpful again, thanks.

The spreadsheets are a good idea, then its all there ready when it comes to filling in the tax return.

I shall read up tonight and start implementing new regimes.