Guide to Paying Less Tax
Have you found yourself wondering how to pay less tax? Being self-employed, you want to maximise your take-home pay while staying compliant of HMRC regulations. The good news is - there are ways to do just that.
- Choose a limited company structure - it's the most tax-efficient option.
- Opt into the Flat Rate VAT Scheme.
- Familiarise yourself with eligible contractor expense claims.
- Take advantage of government schemes and initiatives.
- Appoint a specialist contractor accountant.
- Explore your limited company pension options with an IFA.
- Keep a separate business banking account.
Think about the Flat Rate Vat Scheme
Are you on the Flat Rate VAT Scheme yet? Most contractors benefit from this and saving opportunities can be substantial – for example if you’re on a £200 per day contract you’ll add £1,500 extra per year to your bottom-line and with a daily rate of £600 you’ll add upwards of £4,500 extra per year (based on a 45 week year).
Do you know your eligible expense claims?
Remember you cannot claim for something you didn’t actually pay for in the first place, or can’t provide evidence of payment. You, not your accountant, will be personally liable for any underpaid taxes, so make sure you take advice from experts in the contracting market. The HM Revenue and Customs ‘Expenses’ (480) booklet is 100 pages long so it’s no wonder that your head may be left spinning after reading it. Do your research, speak to an accountant or read our contractor expenses guide.
Pay on time
Avoid all the nasty penalties associated with late payments – you’ll soon get bored of paying penalties for being a few days late. Most penalties start off fairly small, but, over time, penalties and interest charges mount up.
Government schemes and initiatives
Take advantage of government schemes and initiatives. Much like with benefits, it can be hard to know which government schemes and initiatives are available to you. The good news is that your accountant can help you through this minefield. For example, if you’ve been trading for over a year and have a legitimate reason for closing your company down, you might want to speak with an accountant about a special government tax relief scheme which could help reduce your tax liability down to as low as 10%.
Fit for purpose
Is your accountant a contractor expert with relevant experience? Managing the tax affairs of Contractors and Freelancers is different from managing the accounts of the local engineering company. There is specific legislation that applies to contractors. Before appointing an accountant, find out if they are specialists in the contractor market.
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