The end of financial year is almost here and even though there are many months before your tax return is due, this is the perfect time to reassess the way you as a freelance fitness instructor keep track of all the information needed when the deadline is nigh.
It’s too late for the tax year just finishing, but it is the right time to maybe try something new for tax year 20018/2019.
As an accountant I know the impact cash flow and credit control have on a business. You must keep tab on where your money is, when the payments are coming, where from and how much for.
I will never forget a conversation with a fellow instructor a few years back who said that one of the chains owed her hundreds of pounds, but she didn’t have time to get the right records and proofs to chase them. I was shocked!
As a freelance instructor you are responsible for your own tax but people get scared when it comes to their tax affairs and I often get asked: Do I need an accountant? Well, it depends on a few things:
- Are your tax affairs straight forward, meaning, are you simply a self-employed sole trader with maybe another full time or part time job? If this is the case, you should be able to handle the tax return yourself.
- Are you a limited company director and/or get income from properties or shares? I would go with an accountant unless you really know what you are doing.
- Do you lease premises or equipment, or do you subcontract your work? Get advice from an accountant.
- Do you struggle keeping your bills and receipts in order or do you keep meticulous record of your income and expenses? If this side of business is your weakness, then get an accountant.
If you are just a one-man-band and you are systematic in keeping records of monies in and monies out, then you should be fine filing your tax return on your own.
Please note that HMRC has many interactive webinars all year round where you can learn about expenses, tax free amounts, various allowances etc. Just sign up for the service and you will start getting e-mails with dates and times. These are much better than trying to call their helpline.
I personally keep an Excel spreadsheet that is simple but acts as a diary of all my classes (their locations, duration and times), record of income, payments (received or outstanding, methods of payments), business expenses and even profiles used. Please see a dummy version below.
Thanks to this spreadsheet, I know my predicted income for the next couple of months, exact income for the current tax year, how much money is due, when and from which gym, and what tax is due up until now. At any point in time.
This spreadsheet is my bible and it is invaluable if I get paid a wrong amount or to flag up if I did not get paid by someone. It gives me an instant overview of my earnings and profit in the current tax year and previous years (I keep a rolling total). This is handy when you need to apply for a loan, for example, or if you simply want to see how your business is performing.
The key to making this spreadsheet perform its function is consistency in updating it.
I have been doing it almost daily since the start. All my fixed classes are there. Every time I agree to cover a one-off class, I immediately put it there. If I have a night out booked on an evening when I don’t teach, it still goes onto the spreadsheet, so I know not to accept a cover class on that day.
When I get paid, I update the correct column, so I know if the amount paid was correct. If the amount paid is short, it takes 10 seconds to copy and paste the correct records into an e-mail and send it off to relevant gym showing the shortfall without having to go through diaries and doing manual calculations.
Every time I have any business expenses like buying music, insurance, CPD courses etc I record them on the expenses tab.
Some of you may say that you are too busy to do that. I would say I am too busy NOT to. I don’t want to spend two hours once a month or two days at the end of the year frantically trawling through mountains of receipts or my inbox hoping I find all the expenses I can deduct.
When you are diligent with this process, you can do your tax return any time you want and with all the calculations done already it only takes five minutes. I dare you to try it. Right on 6th April 2019!
I see nothing wrong with hiring an accountant, however, you must remember that in the UK if you are a sole trader and only hire an accountant to do your tax return (for that sole purpose), this expense is NOT DEDUCTIBLE.
My spreadsheet is in Excel, so the possibilities are endless – add as many columns as you find useful. I added the PROFILE one as it helps me plan my FTP tests in particular, including the preparation sessions. It also means I don’t repeat the same profile too often.
Should you have any questions on this method of record keeping, please comment below.