For some, working as a freelancer is the ultimate dream. You could choose to work from home in your comfiest sweatpants, or you could spend the day sipping on lattes at your favourite cafe; some even choose to travel and work from abroad. With this type of “free” lifestyle up for grabs, it’s no surprise that freelancing is becoming more and more popular. However, along with being in control of your own timeline and workspace, you are also in control of your taxes – this can be an intimidating prospect. Not such a dream job anymore, right?
Wrong. With the right know-how, and legal tips, doing your own taxes can be easy and less intimidating than you imagine. Below we provide some tips for freelancers, to help ensure you can meet your obligations easily.
Register for Provisional Tax
Because you don’t have a fixed monthly salary, you have to register as a provisional taxpayer. This means you have to estimate your annual tax and pay it to SARS twice a year.
The first payment is due by 31 August, and the second by 28 February. A third optional payment may be made by 30 September if you miss the first two and you want to avoid interest.
Keep Track of Your Business Expenses
While this may seem like a bit too much work at first, keeping track of your business expenses is one of the best ways to save money in the long run. Our advice is to create a self calculating Excel spreadsheet containing all of your relevant costs – office supplies, rental space, cellphone bills, etc.
Add a column for your monthly turnover, and offset your expenses against it. These business expenses are tax deductible, so make sure you have all the right figures to enter in when you submit your tax returns.
Save for Tax Payments
As mentioned above, as a provisional taxpayer, you are required to pay tax to SARS twice a year. To avoid having to dig deep into your pockets when ever that time of the year rolls around, we advise saving a portion of your income every month. Put it aside and access it only when you need to settle your tax.
Claim Medical Tax Credits
If you pay towards your own medical aid, you are eligible for medical tax credits. This means that you can deduct a portion of your monthly contribution, as well as a percentage of any medical expenses paid for from your own pocket – keep the slips!
These deductions must be made be once a year from one of the two provisional tax payments and can be filled out on the IRP6 form.
Keep Your Slips and Invoices
It is not uncommon for SARS to request the documentation to support the amount of tax you pay. Be sure to keep all of you invoices and calculations as evidence of your expenditure.
There you have it, managing your taxes doesn’t having to be taxing. Follow these tips and you won’t end up paying more than you have to.