Becoming a contractor represents a significant change in lifestyle when compared to working as a salaried employee and this distinction is even more pronounced if you opt to set up your own limited company and operate through this.
The majority of contractors make this transition quite easily, with even the most complex aspects – such as taxation, tax id application and bookkeeping – proving to be manageable, particularly if you choose to utilise the assistance available from accountancy services providers.
Engaging the services of an accountant has a number of major benefits, including help with managing your day-to-day finances and informing you of financial remuneration you may be entitled to in the form of expenses.
However, perhaps the most significant aspect you can receive assistance with is tax id filing. This is not something that anyone enjoys having to do and the documentation required for limited companies is even more extensive, complex and potentially far more stressful – the last thing you need after a long day’s work.
Despite having the capability as a contractor to structure your working week as you see fit, you’re unlikely to be able to find the necessary time to fill in an assessment on your own without having to time off work to do so – which will cost you money.
As a result, it is often more cost-effective to seek assistance, especially as you might not be aware of some of the financial gains it is possible to make. There are a number of expenses you are likely to be entitled to, but may not be aware of.
One such example of this is that contractors who work from home are often permitted to reclaim a portion of their utility bills.
A qualified professional will also be able to make you aware if you have attempted to claim for something you are not entitled to. HM Revenue and Customs (HMRC) will often launch an investigation if they find an error in your tax return that provides you with a financial benefit and you could be hit with a fine.
For each element of your tax return, you will be required to provide supporting documentation and HMRC may ask to see these at any time within a five-year period. Although there are software packages and acceptable digital storage systems available, accountants usually offer to hold all documents on your behalf, which is another key benefit. Bear in mind that you may be penalised if you cannot provide complete, accurate records.
It is important to begin planning for a tax return at the earliest possible juncture, especially if you intend to try and complete it without any assistance. As well as ensuring you have copies of all relevant receipts and invoices, you will probably find it useful to clear a section of your diary to sufficiently complete the return.
The main factor that discourages contractors from seeking professional help is the financial cost, but this is often outweighed by the amount of income they miss out on by having to take time away from contracting to fill in the assessment.
Furthermore, while it may not be a financial benefit, the fact that you do not have the stress of having to complete the paperwork and have more spare time to enjoy your life outside of work is surely priceless.