Accounting for Freelancers

If you’re thinking about going freelance and setting up your own limited company – or have already done so – the thought of managing the financial side of things is most probably going to give you sleepless nights! However simple your business model, as a limited company there are certain things you have to do by law, and failure to get it right could result in back taxes and potentially fines, we hope this accounting for freelancers guide is helpful.

So, what are the options?  

1. Do it yourself!

The first available option is you could attempt to do your accounts yourself, but unless you are some kind of math's whizz that also happens to understand the intricacies of HMRC and its multitude of forms, you might want to think again. Doing your accounts takes up valuable time you could spend either working, or socialising with friends and family. Also you stand an above average chance of making a mistake and getting your accounts rejected by the HMRC. These are the things an accountant will do for you.

2. Use an off-the-shelf or online bookkeeping package

Bookkeeping is simply the process of recording your business transactions, whether you record them in a book, a spreadsheet or a snazzy looking online package the activity is the same, YOU have to record them. You can pay people to do your bookkeeping for you, but you're still the one saving receipts and sending over the information, if you forget to send something it's unlikely the bookkeeper will ever know. 

Now the above may all sound a bit ominous, however the good news is that as a freelancer it's unlikely that your bookkeeping affairs will be too complex, after all, you'll just be sending a few invoices (you'll probably immediately spot if they haven't been paid), have a few expenses, pay yourself and some taxes now and again (your accountant will help you with these) and that's about it. 

There are some very good low cost off the shelf packages, some online packages and also free accounting software, the knack is not to be lead by all the bells and how funky something looks, just bear in mind what you will be recording and how much of the system you'll be using. Ultimately you're the one who will be putting in the information, of course we'd advise getting an accountant to check things as no software package online or offline will tell you if you have incorrectly entered a figure or claimed for a non-valid expense. They are only as good as the information you put in.

3. Find yourself a good accountant

Find one that specialises exclusively in providing accountancy services for freelancer's and contractors. Even though you might think your requirements are fairly simple, there’s no substitute for working with a professional. All accountants will say they can cover all aspects of your Tax as a contractor, but the best solution is to go to specialists who deal with contractors in their particular situation every day– who knows the intricacies of HMRC and can make sure that the financial side of your business is always accurate. See case study of the difference between using a specialist contractor and freelance accountant over a traditional high street accountant.

Added to this, a good accountant will also provide you with ongoing tax advice throughout the year and not just at the end when it will probably be too late to save you from an excessive tax bill. And in order to do this, they have to keep abreast of the UK tax system and all of its regulations and legislative changes. Above all make sure you can see your accountant, many firms have popped up that they just offer telephone advice, however there really is no substitute to being able to chat things through face to face. 

For more information on doing your own accounts please visit:

If you do choose an Accountant, you may wonder what your accountant will do for you.

In plain English, an accountant should:

  • Help you to structure your company in the most tax efficient way possible.
  • Help you to understand the best way to take money out of your company.
  • Understand what you can claim by way of expenses and the impact on your income and taxes.
  • Help you to understand all of your tax liabilities both personal and corporate. These include:
    • Employers National Insurance contributions
    • Employees National Insurance contributions
    • Personal income tax
    • VAT (Flat Rate Scheme or standard VAT)
    • Corporation tax
  • Prepare and complete your personal self assessment tax return each year.
  • Understand when, how much and where to send payment for all taxes that are due.
  • Explain the benefits of not taking every penny out of your company along with other tax planning opportunities.

What services does SJD Accountancy provide?

As a client of SJD Accountancy, all your company needs and personal tax affairs are covered by our complete business package for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail. This includes:

  • Year-end accounts*
  • Corporation tax
  • Payroll bureau
  • Dividend administration
  • Dealing with HM Revenue and Customs and Companies House
  • Quarterly VAT Calculations 
  • Support with Annual Returns
  • Personal Taxation
  • Access to your own dedicated accountant* for all help and advice
  • Free bookkeeping software

In fact everything you need, so you will never have to worry about your tax or accountancy affairs again.

Now could you do all this yourself and save £120 plus VAT per month? The simple answer is probably ‘yes’. If you had the time, inclination and patience to learn what to do and also to keep abreast of the UK tax system, all regulations and legislative changes then you could get away with just having an accountant prepare and submit your end of year accounts.

However, the production of a financial statement purely based on invoices and receipts isn't a very satisfactory way to manage your tax affairs and it isn’t possible for an accountant to add value to your business retrospectively. Realistically, you need ongoing, proactive advice throughout the year and not just at the end when it will probably be too late to save you from an excessive tax bill. Poor tax planning (or even worse no tax planning), costs that are classed as ‘benefits in kind’, an overdrawn directors loan account and financial penalties due to late/incorrectly submitted tax submissions could all lead to financial difficulties.

To put it another way, you could learn to rewire your house, service your car or even build an extension but why would you? Wouldn’t it make far more sense to save the hassle, worry and time by hiring the services of a professional.

For more in-depth advice on what an accountant does for you, visit the following pages:

If you have any questions about freelancing or would like any further advice please call our New Client Services helpdesk on 01442 275789 or email sophie.lewis@sjdaccountancy.com

SJD Accountancy

SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
  • Money back service guarantee. All your Emails received by 4pm on any normal working day will be answered the same day. Should it be necessary to leave a telephone message it will be answered same day/following day latest or we will make a full refund of that months fee.
  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

Appoint SJD Accountancy and never worry about your tax or accountancy affairs again.

Form your own Limited company with SJD - our same day online company formation service includes company bank account set up, VAT/PAYE registration and advice on optimum share structure. 

You may also find the following pages, guides and case studies useful:

*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.