Do you want to pursue being a self-employed contractor or freelancer but do not have enough knowledge about how to treat tax? It is important to know your tax responsibility even as a self-employed contractor because you still need to abide with the rules.
Listed below are five tax planning tips you can use as a self-employed contractor or freelancer.
1. Set up as a Limited Company
This is the default step if you are a self-employed contractor because it can help you maximise your disposable income as far as legally possible. A Limited Company is a separate entity from an individual and is governed by the Companies Act 2006. Setting up as a Limited Company can save you more compared to PAYE, Umbrella Company or being self-employed.
2. Claim AIA on capital assets
Capital assets such as laptops, furniture, and office supplies can be viewed as capital assets. Therefore, if you buy this equipment, you can claim your first year capital allowance. It acts as an accelerated depreciation charge that provides tax relief in the year of purchase. The good thing here is that this budget can be changed every year.
3. Make sure to comply with the IR35
IR35 is a piece of tax legislation that assesses contractors or freelancers based on the substance of their working arrangements. It is assessed on a contract by contract basis. You should be able to review whether you are eligible to the IR35 because if you are caught inside of it, it can defeat the object of running your Limited Company business.
4. Submit all the needed information on time
It is important to submit all the needed data, files and VAT return on time by using accounting software. You can opt to do it yourself or you can hire a bookkeeper or an accountant for this. Eclat Accountancy Ltd can assist you in your bookkeeping needs since they offer one of the best accounting and bookkeeping services. Visit their website here. Penalties will be paid to the HMRC and to the Companies House if you continuously submit your data after the deadline. Also, it is important that all information is correct because if there are incomplete or incorrect data, you will only get back what you put in.