Whether you are just starting out or have been contracting for a few years, you are bound to have some questions. We have answered the top questions that contractors have asked us over the years and compiled everything into an easy to read list below.
If you have any further questions, please call our friendly accountants on 01525 303984.
What expenses can I claim?
The general rule is that you can claim any expense that is wholly and exclusively for your business. For example, if you are an IT contractor and you need a new laptop for work, you can claim it as an expense. Other examples of expenses you can claim include postage, insurance, salaries, business travel and accountancy fees.
Do I need an accountant?
There is no legal obligation for you to have an accountant, but tax is time consuming and complex.
How much can I take home as a contractor?
If you contract through your own limited company your take home pay could be anything from 75% to 80% of your contract value. In contrast, umbrella company contractors tend to take home around 60% to 65%.
What if I decide to return to permanent employment?
That is absolutely fine. All you’ll need to do is close your company or leave it dormant. The best option depends on your individual situation and our expert accountants can help you every step of the way.
What is VAT?
VAT stands for Value Added Tax. VAT is a type of tax that is applied to certain goods and services in the United Kingdom. You’ll only need to charge VAT on your services if you are VAT registered.
VAT registration is obligatory once your annual revenue exceeds £85,000. However, it might still make sense to register for VAT and benefit from the flat rate scheme even if your revenue falls below the threshold. It’s ok, our accountants can help you to determine which is the best rout for you.
What is the Flat Rate VAT Scheme?
The Flat Rate VAT Scheme was introduced to reduce the costs of fulfilling your VAT obligations. In a nutshell, the scheme enables you to charge your clients VAT at the standard rate of 20% but pay HMRC a reduced rate.
What are dividends?
In a nutshell dividends are a distribution of your company’s profits to shareholders. Assuming you opt to work as the only shareholder within your company, the dividends will only go to you. The main reason why dividends are an extremely tax efficient way of receiving income from your company is that they do not attract national insurance.
What is IR35?
IR35 was introduced in April 2000 to tackle what HMRC see as disguised employment. In a nutshell, permanent employees were leaving their company only to return a few days later in the exact same role, but as a contractor rather than a permanent employee. As a result, such people would be able to take advantage of the tax saving benefits that are available to contractors, whilst not actually operating as one.
IR35 aims to prevent people from leaving full time employment only to falsely operate as contractors.
Is there a lot of paperwork?
We understand that your time is precious and the last thing you want to do is paperwork. This is why we utilise an online accountancy system that makes the admin side of contracting so much easier. You can expect your paperwork duties to take no more than 15 to 20 minutes per month.
What insurances do I need?
Two key insurances that you’ll probably need are:
- Professional indemnity insurance – This provides financial protection for your company if any claims are made against you.
- Public liability insurance – This protects you against third party claims for injury or damage to people or their property.
Why Integro Accounting?
Integro Accounting is the UK’s only specialist provider of fixed fee, limited company accountancy services for contractors, consultants and freelancers that was established to an award winning standard – our Practice Manager, Maria Hickmott FCCA, won The British Accountancy Awards’ ‘Accountant of the Year’ in 2011.
We were set up with the vision of providing a service that is the ultimate for the dynamic, busy professional of today in a language you understand.
Integro Accounting have designed a bespoke service for the contractor who is always on the go; never forgetting that one size will never fit all.
The relationship you have with your accountant is the most important factor in our service which is why we will always offer unlimited contact with your own personal accountant; whether that contact is via the phone, email or face to face.
We have our 3 offices located in London, the South-West and on the Bedfordshire and Buckinghamshire border. There are also meeting locations in many of the major cities and towns across the Home counties, South-West and South Wales, all conveniently placed so that you never have to travel far to meet your accountant.
If you have any questions about contracting or would like to find out more about how Integro Accounting can help you and business please call Christian on 01525 303984, email firstname.lastname@example.org or request a callback.