The whole world of tax can be confusing, intimidating and downright terrifying, especially if this is your first year as a self-employed human. The amount of tax you pay will depend on how much you earn and the structure of your business. Most freelance fitness professionals will be sole traders, so that’s the set up I will discuss here. You can also set up as a limited company. I’ve written about this in more detail in my e-book “finance and accounting for fitness professionals.”
As a sole trader you will have to submit your tax return and pay your tax bill before the 31st Jan each year for the previous tax year. The tax year in the UK runs from the 6th April to 5th April the following year. So, you have until Jan 31st 2021 to submit your tax return for all income earned between April 6th 2019 and April 5th 2020.
Here are my 5 top tips for making your tax return as smooth and painless as possible:
1. Use an accounting software like quickbooks or xero to track all your income and outgoings
It will save you time, effort and printer ink. You can input all of your income and outgoings as they happen, send invoices and receive payments, categorise your expenses and see your estimated tax bills all in the app. There is a subscription fee to use these apps but guess what, it’s tax deductible!
2. Learn what counts as a business expense
If you’re creative, anything can count as a business expense. Anything you claim for as a business expense reduces your tax bill. You can either submit this to HMRC as one round number or give them a detailed breakdown. I always go for the detailed breakdown option as it shows I’m not just making it up. If you make a couple of grand a year through teaching group fitness classes as a side hustle, probably one round number will suffice. For the fitness pro some of the biggest expenses are:
You can claim the cost of any train/tube/bus ticket you bought for business travel. You can also claim 45p per mile for the first 10,000 miles racked up in the car travelling to/from classes and clients and 25p per mile on anything above that. I line up my MOT with the date I do my tax return so I can see from year to year exactly how many miles I’ve done and it saves me keeping all those petrol receipts! Wear and tear on your car also counts.
o Training and CPD
Any courses for initial qualifications or CPD you undertake will count as a tax deductible expense. So you have an ever better reason to try a course with GFT! In my first year of trading, my course costs were over £1000, which meant on paper, once I had accounted for all my other expenses, I made a loss from my self employed business. This meant a lovely tax rebate at the end of the year!
o Music subscriptions
If you teach a licensed class such as Zumba, Beachbody or any Les Mills program then it is likely you will have to pay a subscription to be given the latest release of the music and keep your instructor license active. This can add up to several hundreds of pounds per year and is one of the biggest costs we face as instructors. Thankfully, it’s all tax deductible.
All venues require a PPL license to play the latest music by popular artists. Some gyms will pass this license cost onto the instructor when they come in to teach a class, to the tune of £1.61 per session (correct as of Feb 2020). This is more prevalent in budget and low-cost chains, however David Lloyd introduced this policy in 2019. You can claim any money you have paid in PPL against your tax bill.
o Gym clothes
Luckily for us fit pros, all the lycra we wear counts as business uniform. You couldn’t teach a spin class in your jeans so you can claim the cost of all the gymshark and reebok orders you do throughout the year.
You need public liability insurance to operate. This usually costs between £50 and £80 per year for most group fitness instructors and personal trainers.
o The silly little bits
Batteries, microphone covers, aux cables, resistance bands, pilates balls, yoga blocks, pool floats for aqua classes. You may also be able to claim that the massage gun you bought yourself was for the business…
3. Don’t leave your tax return until Jan 29th
Just don’t do it. You can actually complete your tax return as soon as the tax year ends, so if you’re really keen you can file for this current tax year on April 6th. The deadline is Jan 31st but you need to leave yourself time to iron out any discrepancies, find all your relevant paperwork and get anything you may need in place such as your P60 or P45 from a previous job. If you don’t feel confident doing your return yourself and choose to work with an account, they will charge you more or may not even have the available time to help you if you approach them mid-January with all your documents.
4. Make sure you save a proportion of every pay check into a “tax account”
Imagine getting through all of that paperwork, all of that stress, pressing submit on the calculation on the HMRC website and discovering you owe a large sum of tax money. Gulp. You don’t have it. This is a situation that nobody wants to be in. Every time you get paid, put 20% of it straight into a separate bank account for taxes. Put a lock on this account so you can’t access the money. This isn’t a spending account or a “I want to go to Thailand this year” account, this is for making sure the tax man doesn’t come knocking at your door! If you bank with some of the online platforms such as Monzo or Starling, you can create lockable money pots that you won’t be able to access until a set date or amount has been reached. If you discover that you don’t need everything you had put aside, happy days. You can now go and treat yourself with the remainder.
5. If in doubt, use an accountant.
A good accountant will save you more than you pay them and are a great investment. You should always use an accountant if your return is not simple – e.g. if you have more than one job, if you own rental properties or are a director in another company, are claiming benefits or maternity pay. Make sure you choose an accountant who has some understanding of what your profession requires; this will help them find every loophole you can possibly use to save tax.
So there you have my 5 top tips for making tax seem a little less scary. For anyone who’s been self-employed for a while, is there anything else you could add? What advice would you give yourself in the first year you started out? Remember to check out my Finance and Accounting guide for over 35 pages of help with your fitness business finances, including a guide of how to get set up with QuickBooks!
I hope you found this article helpful! If you have any suggestions about what you’d like to see on the blog or if you’d like to find out more about the courses and services that GFT offer then pop me an email on firstname.lastname@example.org.