July 10, 2011, Sun, 10 Jul 2011 07:06:44 +0000

Tax Advice For Contractors

Whether you’re an experienced contractor or freelancer or just starting out, there are some tax issues you need to consider. The rules for self-employed people in the UK are slightly different to the rules for people in regular employment. One of the differences is that, if you’re freelance, you need to know what kind of freelancer you are. Does your business mean that you need to register a company, or are you self-employed as a sole trader, meaning that you don’t need a company?

Then there’s the issue of VAT. You don’t have to worry about this too much if you’re on low to average earnings, but if you earn over £64,000 a year then you need to register for VAT. This is so you can collect and claim for Value Added Tax. It can be a complicated business as it adds an extra complication to your tax return, so if you’re worried about it you could ask an accountant to help you. It can be useful to separate the VAT when sending invoices.

You also need to make arrangements to pay your National Insurance contributions as the rules are slightly different for self-employed people. Unless your earnings are extremely low, then you’ll be expected to pay Class 2 NI contributions. You can normally set up a direct debit with Her Majesty’s Revenue and Customs in order to do this easily. You can also opt to pay a higher rate of national insurance or, if you earn a lot of money, you’ll be required to pay the higher rate.

Self-assessment tax returns are one of the big issues for UK freelancers and contractors. These are based on the previous financial (which runs from April – April) and you will be charged tax based on how much you earned in that financial year. You need to make sure to keep a record of all your earnings and all costs related to your work so you can input them into the form and help HMRC come up with an accurate figure as to how much tax you owe.

One final and important thing to think about is the arrangements for paying your tax bill. Even if the subsequent tax year is a lean one and you don’t earn much, you’ll still have to pay your tax bill for the previous year, so it can be a good idea to have a cushion of money to fall back on. It’s also a good idea to save money up throughout the year so you know you’ll have enough to pay your tax bill when it comes to it.

Learn More : Contractor Umbrella Company Or Contractor Tax

Incoming search terms for the article:

Tags: business, contractors, finance, freelancers, freelancing, income tax, tax, taxes.

Filed under category by seovine on Jul 10th, 2011. #

Copyright 2010