“It’s all freelance fun and games until it’s time to submit tax, isn’t it?” is something our parents might say. Or our old bosses. Or our accountants, if we had the good sense to source one.
When you’re an employee, it’s easy to take for granted all the functions that get handled by your employment. Like admin, registering for tax, and making sure there’s toilet paper in the staff bathroom. As a freelancer, however, there are a host of functions that now fall solely to you.
Like the saying goes, “With great freedom, comes great responsibility.” Or was it with great power? Anyway, taxes don’t have to be this big scary, expensive thing you keep running from for the rest of your freelance life.
Taxes For (Freelance) Beginners
There’s a lot of information online to help freelancers do their taxes. From applying for tax directives, to how to register as a company to pay less tax, etc. etc. If you’re new to the game, all this information can often leave freelancers dazed and even more confused than before.
Forget about all that. We spoke to Suzelle Groenewald, a professional accountant and founder of Groenewald & Associates, about the tax basics. She’s helped us simplify the tax process for new freelancers, based on the questions freelancers ask her most frequently. Here are her ‘dos and don’ts’ for first time freelancers – or freelancers who’ve just put off getting their taxes in order.
7 Things Every New Freelancer Needs to Know About Tax
1. Freelancers DO NOT Have To Register As a Company / Any Business Entity
Often, freelancers are under the misconception that they have to register as a company. It’s not necessary and often causes more headaches trying to figure out all the different tax requirements for each business entity. Along with deciding which one will work for you in the long term. If you’d like to expand later on, this would be a consideration. But, for now, keep it as simple as possible.
2 You DO Have To Be Registered For Provisional Tax
Whether you’re a full-time freelancer, or you’re moonlighting outside of your nine-to-five, you will have to register as a provisional taxpayer. Provided you’re under 65 and your taxable income exceeds R75 000 for the tax year.
According to TaxTim, a provisional taxpayer is anyone who earns income other than a salary. Examples include: rental income from a property, interest income from investments, or other income from a trade (i.e.: the service you’re providing as a freelancer).
Regular taxpayers submit one tax return every year in February – an ITR12. But, SARS wants to help provisional taxpayers avoid paying one large chunk of tax in February. Provisional taxpayers make payments to SARS manually in an IRP6 tax return twice a year – in February and August. But, they also need to fill in an ITR12 tax return once during tax season (July – November), along with regular taxpayers.
3. DO Register For PAYE
If two submissions are too few for you, you can submit PAYE returns every month. Groenewald says this will help you keep your personal income tax payments up-to-date on a monthly basis to avoid paying big amounts of tax twice a year.
4. DO Submit Financial Statements To SARS
You don’t have to do this, but Groenewald advises it is to your advantage to submit financial statements as a sole trader in order to simplify the income tax submission process.
5. DO Keep An Accurate Logbook
“If you want to claim motor vehicle expenses, you must keep an accurate logbook clearly indicating business kilometres, clients visited, reason for visit, as well as private kilometres, which must be submitted to SARS when submitting your income tax,” says Groenewald.
6. DO Claim For Business Expenses
…Including those relating to your home office. You can claim a percentage of the bond / rent, your electricity and water bills, as well as your internet usage, as far as it corresponds directly with business use. Tax deductions, yes.
7. DO NOT Throw Away Your Slips
This is the golden rule. You may be able to categorise your expenses on your bank statement, but it may not be enough.
“Keep all your invoices and slips for all expenses you want to claim; SARS may request all invoices as proof of expenses incurred,” concludes Groenewald.