Freelancer cash flow can be tight at the best of times if customers are slow to pay invoices.

Things might be about to get more difficult if the government presses ahead with reforms on when freelancers need to pay tax.

Pay as you go monthly or quarterly tax payments are being proposed so that tax is made earlier than the normal yearly or half yearly tax payments.

Most freelancers are opposed to the potential of tax being paid more frequently for a number of reasons, including the extra administration and accounting cost but also where the money to pay the tax will come from if clients haven’t yet paid.

In an ideal world, the money to pay tax will be set aside ready to pay it when it falls due.
However, the pressures and needs of running a business mean that is not always possible to keep the money set aside and instead the money needs to be topped or found when the tax payment comes around.

Freelancer cash flow problems sometimes result in freelancers having to put their own savings into the business to pay ongoing liabilities such as payments to suppliers and tax.

It is reported that currently 44% of freelancers pay their tax yearly, 39% twice a year and the remainder more frequently.

Whilst a lot of freelancers are opposed to the change, some would welcome it to ensure that tax is dealt with regularly, rather than put off to once a year with a scramble to find a large sum to pay when the payment falls due.

Freelancer cash flow remains an important aspect of the business. Money going out quicker than it comes in will always be a problem so it is important to have solid debt recovery processes in place to ensure that when tax falls due to be paid, that the money is there.