Chartered Accountants (SA) | Registered Auditors
Please note: Our office will be closed between 23 Dec and 6 Jan. We wish you and your loved ones safe travels, a blessed Christmas and a happy 2022!

PROVISIONAL TAX TIPS FOR FREELANCERS

May 27, 2022
Tax

Suffice to say that the world has changed significantly in the past couple of years. The freelance economy has certainly grown.

If you are fairly new to the world of freelancing and all of its mechanisms, we've previously published an article discussing the need-to-know about provisional tax. It covers the definition, categories and payment schedules for provisional taxpayers.

 

This follow-up article looks at some additional tips and tools for freelance taxpayers:

Invoicing

What should be included

A standard (non-VAT) invoice must include:

  •  Invoice
  •  Unique invoice number
  •  Your company name and address
  •  Company name and address of customer
  •  Summary description
  •  Date of supply
  •  Date of the invoice
  •  Amount of individual goods (or services)
  •  Total amount payable
  •  Payment terms (also see note below)
  •  Purchase order number
  •  How to pay the invoice

If you’re registered as a VAT vendor, you are required to produce a VAT invoice and keep a copy (digital or paper) of all invoices issued, including ones issued in error, or that were cancelled. A VAT invoice must contain additional information to a standard (non-VAT) invoice.

Have a look at this article by SAGE to learn more about full and abridged TAX invoices.

 

Personalisation 

Quickbooks offers the following advice on invoicing:

There's an art to the perfect invoice, especially when it comes to being a memorable freelancer. Start personalising your online invoices; you'll get paid faster and you will strengthen your relationship with your clients. 

  •  Showcase positive brand reflection using good design and styling
  •  Itemise work to clearly show clients what they are paying for
  •  Mention your client by name
  •  Use the comments section for a personalised note
  •  Thank your client for work by mentioning a key milestone worth celebrating
  •  Ensure a unique invoice number is shown
  •  Be helpful by offering other referrals within your location

 Use automated accounting software 

Accounting and invoicing software have evolved and become much more user-friendly in the past couple of years. There is absolutely no reason for generating Microsoft Word or Excel-based invoices anymore. It can seem unprofessional, and the additional admin it causes for you or your bookkeeper or accountant to conduct necessary calculations manually is a resource sapping exercise.

 Have a look at this helpful comparison by SME South Africa of some of the most prominent accounting software platforms.

 

Stipulate payment terms 

Knowing how to prompt customers to settle their accounts on time without harming your relationship with them is an essential skill for every small business owner to master.

Payment terms on an invoice let your clients know when they’re expected to pay the invoice and which methods they can use to submit payment. There are a range of payment terms businesses can choose to include on their invoices.

 Make it easy for the recipient to know when to pay by clearly stipulating this on your invoice. In large companies, a separate accounts department may not be aware what terms you agreed with your contact. If you’re a small business or contractor, it’s generally best to avoid complicated payment terms to avoid being misunderstood and having payments delayed.

 For the best results simply state: ‘Payment due within 30 days.’

 Or use less formal language while still being polite: ‘We appreciate your business. Please send your payment within 30 days of receiving this invoice.’ 

(Source: Sage)

 

Provisional Tax Payments

 As discussed in our previous blog, need-to-know about provisional tax, there are two dates within a tax year that provisional tax payments need to be made to SARS.

 

Use the third provisional tax date 

There is also a third optional payment can be made by 30 September in order to keep your total tax payment within the permitted range. Be sure to use this window of opportunity, or you’ll have to pay a penalty.

 

Save for bi-annual tax payments   

To avoid the shock of having to pay two large amounts to the taxman each year, we recommend you save a portion of your income each month. You can put it in an interest-bearing savings account and access it when you need to settle your tax.

 

Tax-deductible business expenses   

Be sure to keep a record of your business expenses. Create a self-calculating Excel document containing all the cost categories. Add a column for your monthly turnover and offset your expenses against it. You’ll need all the facts and figures to enter on your tax return (ITR12).

 Freelancers usually operate as sole proprietors. This means their businesses aren’t separate legal entities.

As a sole proprietor, your business income is reported as part of your personal income. There may be both business-related and personal expenses (like medical bills) you want to claim for.

Make sure you keep comprehensive but separate records for both business and personal expenses.

 

Business expenses that are tax-deductible   

Any costs associated with your day-to-day business operations are tax-deductible expenses. These can include things like your phone and internet costs, rental costs (such as co-working space), travel and transport, insurance fees and marketing.

Larger capital expenses that only occur once a year or so are also deductible. These expenses are usually things like equipment, new computers or vehicles. Even the cost of training or a short course can be claimed. You can also claim for home office expenses and medical tax credits.

Have a look at this list of tax deductible business expenses by The Work Space.

 

 

HUYSAMEN WESTRAAD INC.

In operation since 1987, our accounting firm, Huysamen Westraad Inc. is based in the Vineyards Office Estate in Bellville, on the border of Durbanville. Our professional team of Chartered Accountants and Registered Auditors offer top-quality services by maintaining the highest standard of knowledge and ethics in accounting, tax and auditing. We aim to be the preferred accounting services brand amongst small to medium businesses, family businesses and individuals.

We offer various tax services for companies, trusts and individuals, ensuring compliance with all the applicable tax laws, and providing peace of mind in the knowledge that your business is compliant.

 

 Other resources: 

Need help with your tax submission?

Clients who trust us