Barry Leibovitch is a partner at the accountancy firm, Tish Leibovitch. The firm looks after a number of photographers and their accounts, offering support on sole trading, tax returns and VAT. As part of our 11 Tips for 2011 series, he offers his insight into how to keep your finances on track.
I have four main tips for freelance or sole-trader photographers. First, VAT registration is mandatory for businesses whose turnover exceeds a certain threshold (currently £70,000 per annum) but, if your turnover is below this amount, it’s optional. You need to work out if you’ll be financially better off by registering.
If you deal with the general public, then registering for VAT will increase your charge by the VAT rate, which increases to 20 percent from 04 January. But if you’re dealing with other VAT-registered businesses, then being registered has no net cost to your client and allows you to claim back the VAT incurred on your expenses. There are various VAT schemes that simplify the paperwork, but you’ll also need to weigh up the time you have to put into applying against the amount you’ll be able to claim back.
Second, look at your equipment costs. You can now claim 100 percent tax relief in the year of purchase of any equipment up to £50,000 per annum, so the ideal time to buy equipment is just before your accounting year end. This tax relief applies even if you finance your equipment via hire purchase or a bank loan; you just need to make sure you have a proper purchase invoice.
Third, work out whether you’ll be better off registering as a limited company. There are pros and cons – you face increased paperwork and professional fees, for example, but your spouse can be a co-owner of the company so, if you are a higher-rate taxpayer and your spouse is non-working, then you may be able to share your income and reduce the total tax. A limited company also means that the owner’s liability is limited, so if there are any risks involved in the business, such as bad debts or uninsured liabilities, you may be able to walk away without any personal liability.
Lastly, make sure you get the best possible professional advice. You might think I would say that, but it does make financial sense, and it’s always best to have a qualified accounts adviser assisting you with tax returns. Accountancy fees are all tax deductible and, with the Inland Revenue launching moree investigations into self-employed people, you need to ensure your returns are robust. Your accountant should offer you a fee protection service, so if you do have an enquiry from the Revenue, all your professional fees will be paid. This insurance service only costs about £100 per annum, but it can save you money in the long term, and considerable hassle.
This article, and the other 10 tips from our panel of experts [to be published each day until 31 January], were first appeared in BJP's January issue, published on 05 January 2011. It's still available for purchase from your nearest newsagent until 02 February 2011. To find your nearest newsagent, check our Store Finder.
Most Popular Articles
Updating your subscription status
We have a vacancy for a Key Account Manager working on The British Journal of Photography
Magnet Harlequin, one of the UK's leading Creative Production Agencies is seeking a new Head of Photography.
Bonhams is looking for a full-time photographer for its sale catalogues