Contractors, what’s your new year tax resolution?
As the ribbon is cut on 2018, there’s usually a slight pause in contractors’ calendars which can be used to look back at what your company’s accomplished, fiscally, and how it might be bettered, writes Amanda Swales, director of GoSimple Software.
So on top of that quietly set aside diet plan and your renewed gym membership, New Year’s resolutions on your tax position as a limited company contractor definitely make sense. Financially at least.
1. Get savvy about accountancy fees
Many of us hate accounting, and it’s tempting to throw money at the issue to make it go away. But have you considered how much you’re spending on an accountant, or indeed accountancy software? Getting an expert’s help is all well and good but consider – we calculate that an accountant, on average, will charge you around £250 just to complete your Self Assessment tax return!
Digital software gives you an accurate picture of your income and expenditure, while guiding you on how your Self Assessment should be composed. But cost-wise, again; ask yourself -- are you paying too much? Remember, these tools start from as little as £25 for an annual subscription.
However the very best tools are powered by the Cloud, allowing you to use your smartphone or tablet to upload receipts from your camera. Some contractors we know say parting ways with pesky paper receipts has been their quickest and easiest-win of going digital!
2. Understand what expenses you’re entitled to
Anyone who needs to complete a Self Assessment has the potential to shave hundreds of pounds off their tax bill by getting savvy on which expenses are eligible for relief with HMRC. There are countless costs that you can claim on, depending on the nature of your earnings. Tax software can help you identify allowable expenses, to ensure you don’t miss out. If you’re without software speak to an accountant or, if you’re still unsure, use ContractorUK’s Contractors’ Questions.
3. Keep personal expenses separate
There are harsh penalties for anyone who mixes up eligible tax breaks with those outside of the boundaries. For this reason, it’s wise to keep your non-PAYE earnings and outgoings in a separate account to prevent confusion. That way, you won’t have to waste time sifting through bank statements to distinguish between personal and professional finances.
4. Streamline your finances
We can’t escape tax entirely, but we can look to reduce our taxable income. One example for those that trade via a limited company is splitting take-home pay between a wage and a dividend, although HMRC would like to reduce this benefit.
You might also consider topping up your pension pot to reduce your tax bill. There really are so many ways to streamline your earnings while staying on the right side of HMRC. It’s simply a case of knowing where to save.
Before you click off…
The New Year brings contractor companies across the UK a chance to take a fresh look at their finances. By exploring the latest digital tricks for tax assistance, and growing your knowledge of where money can be saved, you can ensure that 2018 is your best, most profitable year yet.