Tax returns. Let me guess, negative thoughts are currently streaming into your head as you think about the painstaking hours spent dealing with forms and torn receipts.
Breaking news – it doesn’t have to be this way – if you’re self-employed that is – and if done correctly you can save lots of money. In fact, thousands of self-employed people all over the UK are losing money this very minute by not being organised enough.
What is a tax return anyway?
If you’re a sub-contractor in UK construction you will most likely be taxed under the Construction Industry Scheme (CIS). People registered with the CIS pay a flat-rate 20% on top of what they charge for their services regardless of how much they work.
Every year it a legal requirement that you fill out a tax return. You have to submit it by 31 January for the preceding tax year to avoid a heavy fine. So it is important you stay on top of everything.
How organised do I need to be?
Very, but it’s not that hard if you put a few things in place. we’ll keep it brief:
• Keep a spreadsheet of all your invoices with dates and clients included.
Why are expenses important?
On average £322m is overpaid in tax each year. Enough said. This is because subcontractors don’t fill out their tax returns properly and fail to claim for the expenses they’re eligible for.
If you’re self-employed you can claim for a host of expenses which relate to your work. They then get deducted off your tax payment. However, there is often confusion about what you can and can’t claim for.
So what expenses can I claim for?
- Hotels – if you’re working away from home.
- Public transport – to work.
- Subscriptions to trade associations or professional bodies.
- Buying or hiring tools and equipment.
- Laundry of work clothes.
- Tool maintenance.
- Vehicle and premise insurance.
- Public liability insurance and employers insurance if you employ staff.
- Communication costs – internet, mobile and email costs.
- Advertising your business in newspapers, directories, websites etc.
- Purchasing stationery.
- Interest on bank and other business loans.
- Accountancy, legal and other professional fees.
- Cost of goods that you are going to sell or use in providing a service.
You can explore the HMRC website to explore this in more detail if you like. Also, it is worth pointing out that the CIS annual tax return allows for small allowances for self-employed subcontractors. If you use a vehicle for work, for example, this qualifies you for an amount of money per every mile driven.
How do I stay on top of things?
It may seem like an over indulgence but employing a tax advisor or an accountant is usually well worth the money. Not only do they make sure you save every last ounce of money for your business, but they also do the ‘being organised’ so you don’t have to.
And what’s more the money you save in reduced tax payments will probably be more than the money you spend hiring an accountant.