As an Illustrator, you almost certainly don’t get excited when you think about filing your yearly tax return.
There are several steps and responsibilities you must be aware of when it comes to your taxes. An in depth knowledge of tax for the creative industry will not only avoid penalties, but also save you thousands of pounds.
Register with the HMRC
One of the first steps you should take as a freelance illustrator is letting the HMRC know you are self-employed. From the day you start making money as a self-employed professional you should notify the HMRC.
Another key element to your life as a self-employed illustrator is bookkeeping.
Bad Bookkeeping will result in penalties and paying unnecessary tax. Good bookkeeping can save you thousands and allow a stress free tax filing experience.
What records do you need to keep?
Every time you receive or spend money that is work-related you must record it.
Your details over each purchase (whether receiving money or paying) should include
· The person/business that received or paid money
· The Date
· The Amount
· The purpose of the purchase
You should keep all invoices you send to clients and receipts for expenses such as stationary. This can be used as proof of your income for HMRC purposes.
How long do you need to keep your records?
Holding your data is likely to be the next question you face. We would advice you store your bookkeeping documents digitally- as it can be much more efficient in time, space and avoiding loss/damage.
There are different rules in different countries regarding how long you must keep records. The countries tax authority decides this.
UK record keeping regulations
You must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year. HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.
If you sent your 2013 to 2014 tax return online by 31 January 2015, you must keep your records until at least the end of January 2020.
Very late returns
If you send your tax return more than 4 years after the deadline, you’ll need to keep your records for 15 months after you send your tax return.
If your records are lost, stolen or destroyed
If you can’t replace your records, you must do your best to provide figures. Tell HMRC when you file your tax return if you’re using:
· estimated figures - your best guess when you can’t provide the actual figures
· provisional figures - your temporary estimated figures while you wait for actual figures (you’ll also need to submit actual figures when available)