As we approach the new tax year on April 6th, it is vital that self-employed professionals are well aware when submitting their Self-Assessment tax return, of the legislation surrounding tax and make sure they are properly compliant, or they could face significant fines.
Among the information required are wages, dividends received, any other income such as savings, rental properties, bank interest, UK and overseas income. On top of this, directors fee received and PAYE withheld (P60) are also required.
Taxable benefits and reimbursed expenses along with capital gains over £11,100 also have to be considered, while those operating as a sole trader will need to report business income, profit and expenses to the tax office on their Self-Assessment tax return.
However, it is easy to make mistakes with the form, so professionals must ensure they complete every section correctly, double-check their answers and make sure all the required boxes are ticked.
It is also vital to keep up to date with bookkeeping, or records could quickly become inaccurate. Leaving things to the last minute could result in mistakes and mean you do not receive the right amount of money you deserve.
In order for self-employed individuals to make sure they keep their accounts properly, it could be advisable to hire a freelance accountant, as they can come in at short notice and tidy up all your finances, ensuring that all of your accounts comply with legislation.
What’s more, bespoke software is available that enables self-employed individuals to raise invoices, record expenses and take away bookkeeping issues. Real-time tax estimates are also available to be delivered online, with no complicated spread sheets used.
By using tailored technology in order to track their tax levels, self-employed workers are able to sure they are paying the right amount of money and staying within the confines of the law.
How can companies make sure they adhere to IR35?
IR35 is another set of laws that must be adhered to as part of the Finance Act 2000. The legislation is designed to stop people from avoiding tax by disguising their employment by operating as freelancers through their own company.
It is possible that HMRC can decide your working situation puts you within the IR35 framework, meaning you would need to pay tax and National Insurance like an employee, rather than taking in the director’s fee and dividends.
What’s more, falling under the legislation could have a detrimental impact on contractors as it would make their working life significantly more expensive. it is perhaps best to hire a freelance accountant, who will ensure you pay the correct amount of tax.
IR35 was introduced in a bid to cut down on tax and National Insurance Contribution (NICS) avoidance schemes. Before the legislation, freelancers were able to reduce the amount of tax they paid and increase the amount of take-home money.
Locating freelancers disguised as employees is especially difficult for the tax office, with workers in a similar position to when they were part of a business.
To help self-employed individuals adhere to the legislation, there are IR35 compliance reviews available. These aid workers by ensuring they comply with tax and NI obligations without taking them away from their daily duties.
By looking at the terms of your contract and working practices, the reviewers are able to make tax recommendations to ensure you receive the right amount of money and guarantee that you do not have a headache when it comes to arranging all of your allowances.
If you simply do not have the time to carry out the admin work, it is perhaps best to hire a freelance accountant who can take control of your bookkeeping. These experts can come in at late notice and ensure you do not face substantial fines or penalties.
If you need help with your self-assessment tax return, contact us today on 0800 230 0213.