Written by Rajiv Singh
As a digital marketer, present days are busy with client meetings and project enhancement. Given the covid pandemic situation, most of the businesses in the UK have shifted to digital marketing and this has eventually resulted in high demand for digital marketers. However, with an increase in income there is also added responsibility of handling finances – tax planning, return filing, claiming deductions, etc. Here are few tax planning tips that will help digital marketers.
#1 – Be familiar with deductions from Income
Digital marketers can claim numerous deductions from their total income. An ideal option would be to hire an accountant for a digital marketer, who would help you locate these deductions from your current expense. Some of the most common ones are:
- Payroll vs Contract – As a digital marketer, you would need assistance from freelancers who would be assisting you with graphic designing, website development, content, etc. Deductions are available for such payments depending on the status – whether you have appointed them on payroll basis or contractual basis. All expenses towards payroll (Salary, NI and pension contribution from employer) are considered as deduction as expenses. In case you have sub-contracted agency or freelancer, the best way is to pay on invoices and record as consultants fee expenses. The accountant will help you to determine if the status of IRS agent can be considered for your resources. There are more complexities when you are paying outside international boarder. You have to have a proper contract in place with freelancer to make any such payments.
- Subscription – Digital Marketers need softwares and premium memberships to different portals that help them execute their service. This can be a subscription for Photoshop for graphic designing or subscription to SEMRush for website audit and improvements. Such costs are eligible for deduction from the total income.
- Website Expenses – Digital promotions is ineffective without a website. So, it is obvious that digital marketers will have their personal websites as well. Any cost associated with designing the website, purchasing of domain and dedicated servers, renewal of domain and hosting services are eligible for deduction.
- Marketing Cost – Digital marketing involves cost of digital ads. These ads can be in form of Pay Per Click (PPC), Facebook Ads (Social Media) or any other form of ads where a payment is made to publicise a business. Such expense can also be claimed as a deduction. To know more this in details, consider speaking to an accountant.
- Other Miscellaneous expenses – Apart from the above mentioned, there are also other areas like expenses related to business travel, business meals, office rent, Use of own home (if working remotely), Mobile & Internet bills etc., that can be claimed as a deduction.
#2 – Invoice Management
Invoice management is one of the most under-rated accounting practices. The rule of thumb for book-keeping is that the moment you are incurring any expenses for a client project or raising an invoice, should document it in an organized manner. You could use market available cloud-based bookkeeping software that provides access via any device and that will enable you to keep a track of all your expenses and revenue flow from time to time for a given client or project. When it comes to claiming deductions, it is easier to report to the Tax authority or you would just need to furnish all the invoices to your accountant/tax advisor and various avenues for deduction and tax credits planning could be discovered.
#3 –Records for taxation
Like invoices, tax records are also essential to document, perhaps one of the most important documents as it creates a pool of taxes paid by a digital marketer. Maintaining these records is essential from year to year as the tax authorities may want to see your returns at any given point in time. Additionally, keeping complete tax records helps your accountant understand your current tax liabilities and missed returns if any.
#4 – Bank Statements
In this digital era, we can access our bank accounts easily via app or website. As a digital marketer, make it a habit to download your statements every month and match the same with your accounts. If you face any challenge in reconciliation, then ask your accountant to assist you. Bank statements serve as a pool of financial information with respect to a business/ profession. The balances play an important role in determining your tax liability.
#5 – International Payments
Digital Marketers have the flexibility to work from any corner of the world. This means there can be international clients as well. A separate record needs to be maintained for income generated from international clients. Currently, if you are in UK and non-domiciled then you don’t pay taxes on income generated from foreign, provided it is less than £2,000 in a tax year, AND the income has NOT been transferred into a UK bank account. When the income gets transferred into the UK bank account, it falls under the general income tax band for the individual. For other countries’ residents, different local tax laws apply, I would suggest sending us an inquiry or contact your local accountant/tax advisor to answer specific queries.
The current era is dedicated to professionals. Just like digital marketers, accountants are also professionals who serve clients with tax planning, accounts auditing, return filing, and many other accounting-related services.