Another skill that is not taught at college.
Book keeping is not rocket science. The principles are straight forward:
Find out which expenses are allowable business expenses
How do you ascertain which expenses are allowable? The general rule is: allowable expenses are those that are wholly and exclusively incurred for business running purposes. If you live in the UK, find a basic guide regarding allowable expenses here. You can either ask a tax adviser or accountant or you ask the relevant tax office. Tax authorities tend to have websites these days, search them for the relevant information (see above link provided for UK-relevant information). If the answers provided are incomplete or seem not relevant to your business, ring up. You only have to do it once.
Collect all relevant receipts diligently and enter the details in an income/expenditure spreadsheet
Save every business-related receipt in a folder, envelop or even on a spike. Save one financial year’s worth of receipts in one receptacle. Thanks to modern technology there is no need to sort your receipts in consecutive order, the computer will do it for you (use the “sort by” facility in Excel).
Every once in a while (at least once per quarter), when you have a lull in translation business, get out the receipts and enter them into an Excel spreadsheet, divided by income and expenditure. On the expenditure side have columns for various kinds of expenditure. To make your life easy, find out how your country’s tax office groups expenditure together and base your itemisation on these groupings (e.g. rent, rates, power and insurance costs or accountancy, legal and other professional fees).
Don’t leave it too long between entering up these details. The longer you leave it, the more difficult and time consuming to sort it out.
Use the collected data to fill in your end-of-year tax returns
If you have filled in your spreadsheet continuously during the year, and you have followed the above advice and itemised your outgoings the way the tax office likes you to, the tax return will be simple: Take the totals for the year and enter in your tax return form.
Find out which allowances you may be able to offset against your income
The tax authorities don’t just allow itemised expenses, there are also general allowances you can claim (e.g. for the use of a car or having a home office). Visit the appropriate authority’s website (gov.org in the UK), ring them or ask an accountant. You don’t have to employ the accountant for the year, you could just go for a one-off meeting to ask his advice on what you can and what you can’t offset against tax when working from home as a freelance translator.
It’ll be money well spent.