While a lot of my writing is fairly introspective, I also like to write about practical things that will help others and often write about topics that others shy away from. One of the topics that ticks both of those boxes is money. I wrote about it before when I decided to splurge on myself and again when I wanted to share openly about my rates. Now it’s time for something slightly less exciting — tax!
I should start by saying that numbers, and consequently money, are my nemesis. I used to say I did words and pictures but not numbers. I didn’t understand a word of maths class and very little has changed since to be honest. My accountant actually sighed on the phone to me when she was explaining something last week!
So when I realised I was on track to tip the £85k turnover mark in my first year, and would have to become VAT registered, my first reaction was to panic.
I’m lucky to have a great accountant.* This is something I decided very early on that I wanted to spend money on. And I haven’t looked back. So after a bit of back and forth with them it became apparent the registration would hit in the middle of working with three current clients.
The panic deepened.
My accountant didn’t understand the procurement aspect of my work, simply suggesting that most organisations are used to paying VAT and it would be fine. What they didn’t understand was that I had been procured to deliver work to a budget, that budget included VAT, and as I wasn’t registered at the time of quoting I had used the full allowance on time. A surprise few thousand pounds on my clients final invoices wasn’t going to fly.
So first off here are the practical things I did:
- I worked out when the registration would hit and where in the invoicing cycle I would be with my three existing clients.
- I worked out that I could get the final invoices for two of the clients in before I became registered. They would be the two that it would be a problem for procurement wise. At this point I breathed a sigh of relief.
- I am much newer to working with the third client so we agreed I would invoice in full for the work following my VAT registration (they were happy for invoices to carry VAT).
- I made sure I flagged it with a fourth client I was also due to start working with this year, ensuring they were aware from the start that my invoices would carry VAT.
Moving forward I still have plenty of questions running round my head about what this means for how I work and how I cost jobs, especially when it comes to sub-contractors. This is part of what makes running a business interesting — I’m constantly learning. Expect many more exciting Monday notes on tax!
I also wanted to take the time to acknowledge the exciting part of this. That I’ve hit £85k turnover in my first year of being in business. The under confident woman in me immediately wants to follow that up with justifications about paying subcontractors and corporation tax to ensure nobody out there thinks I’m greedily pocketing all that cash and spending it on holidays.
But so what if I was. I’ve worked hard this year and I think it’s important to celebrate these milestones — especially as a woman.
So cheers to Joy’s first year and surpassing my financial target.
My accountant is Maslins. Please mention my name if you sign up with them based on this recommendation as I get a cheeky discount.
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