It looks like the translation industry will feel the effects of Gordon Brown’s so-called “neutral budget“. As an sector largely made up of small companies and sole traders – the biggest losers in last week’s budget – the effects of a rise in the rate of corporation tax from 19% to 22% will be sorely felt. (More comment here, here and here if you’re interested in the details). And where is this money going? Supporting entrepreuneurship in other ways, perhaps? Advancing the cause of the knowledge economy?? Of course not, silly, it will help fund the reduced tax burden on big businesses!! (but that discussion I’ll save for another blog 🙂 )
So what does this mean for the self-employed? The Chancellor has claimed that any hike in tax rates have been balanced out by generous tax credits, but the fact remains that not only are these credits extremely difficult to apply for, but they don’t actually apply to the majority of small businesses anyway. (And certainly not to the average translator whose operating tools mainly consist of a PC and broadband connection).
What annoys me most about this kind of smoke and mirrors approach to taxation is that it really does nothing to help the average sole trader understand their tax position. HMRC (the agency formerly know as Inland Revenue) have tried very hard to convince us that “tax doesn’t have to be taxing”. Anyone who has ever submitted a self assessment form knows this is utter rubbish, of course, but is it too much to ask to be able to complete my self assessment form myself??
I consider myself to be well educated and more than financially literate, yet I’ve been obliged to hire an accountant to submit my tax returns since registering as self employed. Believe me when I say there is nothing especially complex about my financial affairs – I stay on top of my day to day business accounts, keep very careful records and produce mini profit and loss statements every year (ambitious, I know, but I do have a special interest in finance 🙂 ). Despite this, the process of completing my self assessment forms was such a headache that I figured I was better off paying an accountant and putting the time and energy into developing my business. That’s a very difficult decision to make when you’re a newly established translator and not at all sure how you’re going to pay your bills, but I really felt stuck.
So if you are considering going freelance, before registering with HMRC, invest serious time and energy into planning how you will manage your tax situation. Do you have the option to register in another country for tax purposes? (we are a globe trotting bunch, after all) Is self-employment really something you are ready to commit to? Registering is easy once you decide to do it, but you can be sure that de-registering will be a lot harder should you change your mind. Weigh it all up – it may well save you a lot of time, grief and money down the track.
PS Just in case it’s not too late to claw back some of your hard-earned cash, here‘s some pretty generic advice from The Times on how to beat the budget.