The tax burden placed on many businesses can prove to be a real problem for the company’s cash flow, no matter how large or small the firm.
If you’re a contractor and are technically self-employed, squaring up your finances with the taxman can be especially challenging. Her Majesty’s Revenue and Customs (HMRC) will always want their share of your profits and the consequences of not keeping accurate records can be dire.
In this post, we’ll look at how you can obtain assistance with your tax affairs if you’re self-employed as a contractor.
Lots of advantages
Working as a contractor brings with it a number of benefits compared to traditional 9-to-5 full-time jobs. The focus on short-to-medium term project work allows you to pick up different skills and gain experience of a wider variety of tasks, rather than focusing on the same aspect of your industry for possibly years at a time.
Contract work also offers flexibility, as it means you can take up work that suits your life plans. If you’re moving away in a few months’ time but need work to tide you over, for example, it makes sense to pick up a short-term contract.
Contract work also comes with its downsides. To counter against uncertainty, you may need to make sure you have a financial cushion in place in case you are in-between contracts for a while.
One of the most difficult aspects of working as a contractor is the tax issue: you will most likely need to register as self-employed, which means you’re responsible for filing an annual tax return.
The vast majority of standard full-time employees never have to worry about this, as their company will operate a pay-as-you-earn system where taxes are deducted by the finance team before wages even hit bank accounts. As a contractor, you’ll have to do this yourself.
Help is available
Luckily, help is at hand. HMRC provides you with some basic information on what records you should keep, such as receipts for any costs, sales invoices, bank statements and more.
You could also look into signing up with an umbrella company. These firms operate payrolls designed especially for contractors who are looking for help with IR35, and for a small fee will handle all your tax affairs and lift the burden off your shoulders.
An arrangement like this is popular with clients, too, as it gives them peace of mind that no tax dodging is going on.
There are lots of websites available for contractors to get information that can be found through a Google search. Several of these sites have interactive forums that allow you to get advice from other contractors who are also personally managing their taxes or using umbrella companies.
As a contractor, it’s easy to find yourself needing help with the administrative headache of sorting out your own tax affairs, however, with a little research, it’s possible to get your issues with HMRC resolved quickly and efficiently.