All you need to know about submitting your Self Assessment tax return

Many people don’t like to hear the ‘C’ word mentioned until at least December. However, if you’re self-employed, now’s the time to start thinking about the festive period, particularly with regards to submitting your Self-Assessment tax return (SATR). Here’s all you need to know:

 

What is a SATR?

Self Assessment tax return or SATR is the system by which HM Revenue and Customs (HMRC) collect tax on your income.
Whereas tax is typically deducted automatically from wages, savings and pensions, if you’re self-employed, it’s your responsibility to declare taxable income and to notify HMRC that you need a tax return form. Fail to complete a return when necessary and you’ll receive a penalty.

 

Who needs to complete one?

If you can say yes to one or more of the below criteria for the last tax year (6 April 2017 to 5 April 2018), it’s highly likely you’ll need to complete a SATR:

You were self-employed and your income was over £1,000
You received over £2,500 from renting out property
You’re a partner in a partnership. The Partnership will have to file a return, too
You’re a company director
Your annual income was £100,000 or more
Your annual income was £50,000 or more, and you or your partner was in receipt of child benefit
You received over £2,500 in other untaxed income, such as commission or tips
You needed to claim expenses or reliefs, or you’re a trustee
You had Capital Gains Tax to pay, for instance if you sold shares or a second home
You had £10,000 or more in dividends or from other investments
You had income from abroad you needed to pay tax on

If HMRC send you a return to complete but you find none of the above apply to you, you should get in contact with HMRC as it may be an error.

 

What are the deadlines this year?

You have to submit returns for tax years, not calendar years. Meaning, this return will be to declare tax on income and gains from 6 April 2017 to 5 April 2018. The deadlines for submitting the returns are as follows.

5 October 2018 for registering for Self Assessment if you have never submitted a return before
31 October 2018 for submitting a paper tax return
31 January 2019 for submitting an online tax return (you need to submit your online return by 30 December 2018 if you want HMRC to automatically collect tax owed from your wages and pensions, however you must be eligible)
31 January 2019 for paying all of the tax you owe

 

What are the penalties?

If you need to file a return but it’s up to three months late, you’ll receive a penalty of £100, with this sum increasing the longer you leave it. If a partnership tax return is late, all partners will have to pay a penalty.

 

What if you make a mistake?

If you realise that you’ve made a mistake on your tax return, don’t fret – you’re able to make amendments after you’ve filed it. But the deadlines are as follows:

31 January 2019 for the 2016-17 tax year
31 January 2020 for the 2017-18 tax year

 

Partnering with Intouch

If you’re one of our clients, your dedicated Personal Accountant will have already been in touch to guide you through the process and make sure you know exactly what needs to be submitted.

We offer complimentary completion of a SATR for one employee as part of our comprehensive monthly services for contractors. If you want to find out about the many other features of this plan, or about the benefits of partnering with Intouch, call 01202 375758 today.

 

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

How to switch over to Intouch – Infographic

Are you thinking of switching over to Intouch from your current accountant? Then take a look at our infographic to see how easy it is…

 

Switching to Intouch

The importance of personal service

We’ve all been there: we call our bank, a service provider or company with a minor query, only to be passed through multiple departments and asked the same questions over and over again. We feel like we’re just a name in a long line of callers – and we can’t help but feel fed up and frustrated when we put the phone down.

In these situations, there’s one important thing missing: the personal touch. And when you’re paying for a service – for instance, from a Contractor Accountant – personal service is something you truly deserve.

Personal service is important because:

• It shows respect. In our opinion, adding a personal touch is part and parcel of offering a quality customer experience. After all, when you entrust in a company to provide a service (and you’re paying for the privilege), you don’t expect to be treated like ‘just another customer.’ You want to feel special – and you deserve to.

• It enhances relationships. You’re far more likely to be satisfied with a company that treats you as an individual – a company that understands your unique circumstances, and offers quality solutions based on your needs.

• It reduces time-wasting. Time’s precious when you’re a freelancer or contractor running your own company. By pairing with an accountant who’s taken the time to understand your unique needs, you can expect to receive expert, accurate advice and support almost straight away, whenever you need it. Less time wasted means a more efficient partnership.

 

Contractor accounts: what to look out for

If you’re just about to set up a Limited Company, or have decided it’s time to switch accountants, ensuring you’ll receive a personal service throughout your professional relationship should be one of your top priorities.

When searching around, an important thing to look out for is if you’ll be dealing with call centres and Account Managers, or if you’ll be paired up with your own, Personal Accountant. In all cases, the latter option is best.

A qualified, expert Personal Accountant will take time to familiarise themselves with your accounts and learn what you want to achieve financially from your contractor pay. They’ll be on hand to offer tailored support, based on your goals, whenever you need it.

 

Intouch: personal, professional

The team at Intouch prides itself on our personal approach to contractor accounting. In fact, it’s the one thing we think really differentiates us from all the other accounting companies – it’s our USP, so to speak.

Choose Intouch and you’ll be partnered with a dedicated Personal Accountant the moment you become one of our valued customers. Their first job will be to get to know you on a personal and professional level, which, in our eyes, is a crucial step in providing a high-quality service.

As soon as your Personal Accountant feels comfortable with the nature of your business and what you want to achieve, they’ll explain how they will help you to reach your goals.

A monthly fee entitles you to unlimited advice from a dedicated Personal Accountant, 24/7 access to our portal for day-to-day accounting tasks, and assistance with duties such as quarterly VAT returns, year-end accounts, payroll returns and self-assessment tax return.

Ultimately, your Personal Accountant is responsible for supporting you with the financial duties owning your own company brings. This means your time will be freed to focus on attracting new customers and growing your flourishing business.

We’ve gained a reputation for our unrivalled service and industry knowledge, and as testament to this have been voted the UK’s Best Small/Medium-sized Contractor Accountant by Contractor UK readers. Start your journey with us today by calling 01202 375 293.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

IR35 in the private sector – HMRC announces consultation

In last Autumn’s Budget, the government announced that it would consult on how to tackle non-compliance with IR35 rules in the private sector. On Friday, HMRC issued this eagerly-awaited consultation which they say “looks at improving the rules around ‘off-payroll’ working so contractors who work through their own company pay the right tax.”

At Intouch, we would suggest that HMRC learn from the negative feedback following the public sector reform and at the same time, remember that private sector and public sector hirers are different entities with different motivations and potential responses. They engage with their clients in different ways and often at different levels and as such we’d encourage HMRC not to view them as the same with respect to off-payroll rules and deemed employment. Input should be taken from across the industry with a view to tailoring a bespoke private sector solution that improves compliance whilst mitigating any potential administrative burdens.

The consultation timescales mean that any changes could be introduced as early as April 2019, although we’d urge HMRC to take the time to consider timings very carefully to avoid any negative impact to the UK economy as we move forward with Brexit.

Intouch will be responding to the consultation and we encourage all other interested parties to contribute; that means contractors as well as end-hirers who want to continue to have access to and support self-employed contractors. You can see the consultation and how to send your response here – you have until 10th August!

If you want to have your say but need to brush-up on your IR35 knowledge, check out our resources below:

Guide – Embracing IR35
Infographic – IR35; Don’t panic!
IR35 FAQs

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

 

What insurance do you need as a contractor?

When starting up as a contractor, taking out appropriate insurance should be one of the top things on your to-do list.

 

Why do you need it?

Rather than being just another cost to factor in, insurance can help you secure that first contract, as most clients and agencies will insist that you’re sufficiently insured before investing in your services.

There are other benefits in seeking protection from insurance, beyond the obvious peace of mind that it brings: it provides you with cover should you be accused of causing property or reputational damage. Insurance also acts as a key IR35 status indicator, signifying to HMRC that you’re genuinely self-employed and not a ‘disguised employee’.

To put it plainly, having appropriate protection in place makes business sense and gives you credibility. The question is, what business insurance do you need?

The answer will vary depending on your area of business. But there are three types of insurance that nearly all contractors will require:

 

1. Professional Indemnity

It goes without saying that you want to do a great job for your clients, for reasons of professional pride and repeat business, but sometimes errors or omissions can occur which can cause a relationship to go sour.

Being accused of professional negligence is just about every contractor’s worst nightmare, but when you have Professional Indemnity insurance, you don’t live in fear of an accusation by a client that your work has cost them money. It provides cover for legal defence costs and if damages are awarded against you.

 

2. Public Liability

If your line of work dictates that you have to work in someone else’s premises or out in the field, then you’ll need Public Liability insurance. It provides protection in the event of an accident while supplying services; for example, injuring a passer-by or breaking a valuable piece of equipment.

The protection will cover the cost of any potential lawsuits, replacements, legal fees, medical bills and compensation resulting from an accident. Failure to take out Public Liability can lead to you having to pay compensation out of your own pocket.

 

3. Employers’ Liability

If your company employs anyone other than yourself, you’ll need Employers’ Liability insurance. In fact, if you employ more than one employee, it’s a legal requirement to take out cover. Employers’ Liability insurance protects you against the cost of compensation as a result of employee injury or illness.

While a claim against you might be unlikely, especially if you have a close relationship with your employee(s), many agencies and clients will only consider your company if you’re sufficiently covered.

 

Where can you buy the right insurance?

The amount of cover required depends on your individual circumstances – the degree of risk can vary considerably depending on what it is that you offer and how it’s offered. But, it can be difficult to ascertain just how much cover you might need. Some insurers make contractors’ lives easier by offering packages that come with comprehensive cover as standard.

Specialist contractor insurance provider Kingsbridge combine Public Indemnity, Public Liability and Employers’ Liability cover into one single policy. This policy also comes with Occupational Personal Accident cover as standard, plus Directors’ and Officers’ Liability insurance.

 

To find out more about Kingbridge, click here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

 

What you need to know about IR35

Familiarising yourself with numerous legislation is just one of the many tasks involved in setting up your own business. But for contractors, specifically, there’s a crucial piece of legislation to get to grips with: IR35.

 

What is IR35?

IR35 is a type of tax legislation put in place to prevent contractors from limiting their tax liabilities by supplying services through a Limited Company, despite carrying out the same work as the company’s employees. In short, it’s designed to stop false self-employment.

 

Does it affect all contractors?

HMRC defines ‘disguised employees’ as contractors who are treated and act like any other member of staff working for a company. IR35 law aims to stop disguised employees trading under an intermediary, which would entitle them to greater tax benefits.

It may seem simple on paper, but in actual fact, many contractors have found it difficult determining whether or not the legislation applies to them. Trading as a Limited Company and working ‘outside’ of IR35 can result in higher take-home pay than an Umbrella agreement, but you need to be certain about your position or you could face financial penalties.

Another thing to bear in mind is that the legislation applies to each individual contract. This means that you might be outside of IR35 for one contract, but within its scope for another. And that’s why it’s important to conduct thorough contract review processes, in order to clarify if any part of your work falls inside the legislation.

 

What penalties could I face?

Contractors found to have been ‘careless’ can be fined 30% of unpaid tax. This climbs to 70% of unpaid tax if the contractor was aware they were inside of the legislation but deliberately did not make the payment; and 100% of unpaid tax if they also tried to conceal their actions.

 

Whose responsibility is to determine IR35 status?

Big changes were introduced from April 2017, which saw the responsibility of determining IR35 status move from the contractor to the client. But this is only where the contract is with a public sector body. The government are currently also debating rolling it out to cover the Private Sector, although this is likely to take some time, if it happens at all.

Some evidence suggests that this has had a negative impact on the industry, causing firms to insist their contractors trade under an Umbrella agreement to relieve the burden of payroll and other administrative duties.

 

Pairing up with a professional

If you’re considering setting up as a contractor, the experts at Intouch Accounting can help you to navigate the minefield that is IR35. We’ll make sure you understand your rights and risks under IR35 and other laws, and will review your contracts for compliance. To find out more about our service, get in touch today.

 

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

 

 

 

 

 

 

Dividends – how often should I take them, and when are they taxed?

Dividends can sometimes be difficult to understand and many contractors find themselves wondering when they should take them and when they actually get taxed? In this blog we answer these two questions and cover the timing and tax point of dividend declarations.

 

Question 1: When are dividends taxed? Is it when they’re paid, or the date they’re declared?

A dividend will be included on your tax return, according to the date the dividend was declared as becoming payable. The date it was paid is not relevant. For example:

A dividend declared 1 April 2018, that was ‘payable’ on 7 April 2018, is included as income for the 2018/19 tax year regardless of when it is actually paid.

Remember! Should HMRC decide to investigate, in order to support all dividends, you should keep copies of all dividend vouchers and minutes. Your contractor accountant should have a dividend template for you to use, then you can simply send them a copy every time you use it.

Tax planning opportunities

If you have some of your basic rate tax band left, have sufficient profits in your company and for whatever reason, you don’t want to pay yourself a dividend at that time, you’re able to declare a dividend immediately payable, if you intend to take the cash at a later date. This means you can fully utilise your tax allowances year on year, as it ensures the dividend falls into a specific tax year.

Don’t forget that as of 6 April 2018, the dividend allowance is £2,000. This applies for 2018/19. It’s worth taking at least £2,000 in dividends, as this amount is tax free, regardless of which tax band you fall into. Your contractor accountant will be able to review the level of dividend allowance available and amend this as necessary.

 

Question 2: How often should you pay yourself dividends? What are the dangers of monthly payments looking like disguised salary?

We generally recommend our clients to pay themselves dividends either monthly or quarterly. You can, however pay them whenever you wish.

As long as the correct dividend voucher and minutes paperwork are in place and your company has sufficient funds to cover the distributions, there’s little chance that HMRC will see your dividends as salary.

We do advise all clients to keep their salary and dividend payments completely separate from one another and pay all shareholders separately in the correct proportions, so that a clear audit trail can be provided. Should you be subject to an HMRC review, having clear audit trails in place can make all the difference, as every item is easy to trace and nothing has been missed or hidden.

If you’re looking for specialist, tailored advice regarding dividends that’s unique to you and your circumstances, speak to our team today to find out how Intouch can help you. Our Personal Accountants are here to be your guide, to ensure you get the best and most from contracting.

 


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Cessation of Contracting – what to do when it’s time to close your Limited Company

Cessation of Contracting

 

Whether you’re retiring, going back into permanent employment forever, or your circumstances change, there will potentially come a time when you will need to close your Limited Company.

 

But how do you go about it and what steps do you need to take? Director of Operations, Laura Hepworth takes you through the stages, to ensure you get the best outcome.

 

Extinct or just sleeping?

Whilst you may think that closing your company is the right option, it might be worth exploring whether you’re better off by putting your Limited Company in a dormant state.

 

In short, a dormant Limited Company is not trading, but is still required to prepare and file accounts with Companies House, submit a Corporation Tax Return and submit accounts.

 

If you are no longer contracting, but may return to contracting in the future or wish to keep your company name protected, then putting your company into a dormant state is the right step for you.

 

Company Liquidation

If you have decided that closing your company is the right choice for you, then you must first start off by asking yourself whether your Limited Company can settle its debts. If your company doesn’t have sufficient funds to pay your creditors in full, then it makes closing your company a much more involved process, which you’ll require professional assistance in doing so.

 

Closing your company

Assuming your company is able to meet its financial obligations, the process of actually closing the company is complex yet relatively straightforward.

 

Firstly, start by deciding on the date you wish to close the company. It’s important not to process any further transactions after this date, other than those required as part of the closure process.

 

HMRC will need to be notified of your decision to close your company as soon as you have decided on the date. We advise holding off from submitting your final accounts when you inform HMRC, as you may have some late-occurring expenses which will need to be accounted for. If VAT registered, you will need to cancel your registration. You’ll also need to pay any outstanding PAYE and/or National Insurance Contributions (NICs), run a final payroll to obtain P45s for yourself and any staff you employ and submit a P35 Employer Annual Return.

 

As soon as you know there are no further funds going in or out of your company, it’s time to close your business bank accounts and then prepare and submit your final accounts. The Corporation Tax due will be calculated by HMRC, which must be paid within nine months (although it’s recommended to do so as quickly as possible, as the company cannot be closed until all money owed has been paid). Once completed, any money remaining should be taken as a dividend.

 

Remember! Not to leave any funds are left in your company’s business bank account(s) as anything left can revert to the Crown.

 

What’s next?

Three months after your Limited Company has ceased trading, use the DS01 form from Companies House to dissolve your company. You will then enter a consultation phase with Companies House, where they publicise the proposal to strike off your company. This gives any interested parties the opportunity to challenge the process and should there be no objections or difficulties (or you change your mind!) your Limited Company will be struck off the Companies House register.

 

Final thoughts

Closing your Limited Company is a big step to take and one that you shouldn’t take alone. The first person you should discuss your plans with is your expert Personal Accountant, as they will be able to offer your tailored advice and support throughout the entire process.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

The Limited Company contractor’s guide to pensions

Pensions

As a Limited Company contractor you may pay into a pension in order to lower your overall tax liability, but are you aware of how the payment is made, who the contract is between and the implications this can have on how the tax relief is obtained? Is your pension being treated correctly?

 

Employer’s Pension Contribution

You should inform your pension provider in writing, that your pension contribution is in fact an Employer contribution and that it is being made gross. As the contract is between the Employer and your chosen pension company, payments should therefore be made direct from the Employer’s bank account (your Limited Company’s business bank account).

 

For example, a contribution of £800 will increase your pension pot by £800.

 

Employer’s contributions are deductible expenses for Corporation Tax purposes, meaning the company’s profits are reduced by the value of the contributions and the company pays less tax as a result.

 

Remember! Employer contributions are a deductible expense for IR35 deemed salary calculations, which can reduce the tax due by a large amount (which is great news!).

 

Your Personal Pension Contribution

If you personally pay into a pension, then none of it will go near your Limited Company. You’ll personally pay your pension provider a net amount and your provider will then claim 20% for tax from HMRC.

 

For example, a contribution of £800 will increase your pension pot by £1,000.

 

Personal contributions also increase your basic rate taxband, meaning you can earn more money before you cross over into higher tax rates. If you make a pension contribution of £800, your basic rate taxband will increase from £32,000 to £33,000, so you will pay a lower rate of tax on that portion of income.

 

However, if you’re not a higher rate taxpayer then this relief will be wasted. It could be more beneficial to make Employer contributions direct from your company, or increase your personal income to take full advantage of the relief. Speak to your Personal Accountant to understand which route is the most beneficial one to take for you and your circumstances. It’s a delicate balancing act when taking an additional dividend to pay into your pension, so make sure your contractor accountant completes the calculations on your behalf.

 

Are you paying net or gross, as an employer or an employee?

Your pension provider will be able to give you this information. If your payments are treated as net but are paid through your Limited Company, then you’re getting tax relief twice which will arouse suspicion from HMRC and could result in an unexpected tax bill.

 

Remember! The overall limit for your pension contributions is £40,000 (for tax years 2015-16 and 2016-17), which includes both payments made by you personally and by your employer.

 

Got questions about your pension? Speak to your dedicated Personal Accountant for tailored advice that’s unique to your needs as a Limited Company contractor.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.