Open a separate bank account, where all your freelance and business income gets paid into and where you pay business transactions out from.This not only makes accounting easier, but shows the monthly profit you’re making. Freelance income, especially when you’re booked with an agent will normally have a 25% deduction and the 10-15% agency fee.
Be sure that you deduct the agency fee as an expense against your freelancing income, as well as the other business related expenses. 2. If you travel (by car) a lot for business, keep a logbook. There are many apps and websites that can do the tracking automatically, using the GPS on your phone.
Keep Track of Expenditure
When you have lots of motor vehicle expenses, the logbook will allow you to claim a % of that expense. 3. Set aside 10 – 20% of your non-PAYE income for provisional tax payments, or for the annual tax payment. The reason for this is that non-PAYE is not covered and many people spend all the income, leaving them panicking when they need to make a large tax payment. 4. The more business related expenses you have, the more you can claim against SARS, but do note that EXPENSES ARE MORE EXPENSIVE THAN TAX.
Tax is always a % of an expense.
Example:
Person A
Income: 100k
Expense: 100k
Profit: 0
Tax: 0
Person B
Income: 100k
Expense: 50k
Profit: 50k
Tax: 15k
Better to get a 50k profit and pay 15k in tax than earn no profit and pay no tax.
Person B has a 35k better cash flow than Person A 6. You don’t always need to set up a PTY for your side hustle income. From a tax point of view, if you are the sole director of a PTY, you’ll end up paying 42.4% in taxes. (Company tax 28% + Div Tax 20%)
Sole Prop vs PTY Ltd
A self employed person can claim business expenses just like a PTY can. 7. The self-employed person can stay quite tax effecient (especially if you’re in 36% or lower tax bracket). The reason for this is because an individual can also claim business related expenses. 8. Disclaimer: This thread is just a few ideas / suggestions. While I am a registered tax practitioner, this is not a be all, catch all advice.
Should you which to get more specific advice, you should reach out to a consultant. 9. Forgot one last thing. Pay a bookkeeper once a year (during March each year), to capture your business bank account to a trial balance.
This can be used as supporting documents for your taxes and to be sent to your tax person to do your taxes for you. 10. Another one (DJ Khaled): Keep BIG invoices. Camera equipment, computer equipment, office furniture etc.
