Contractor Taxation - Explained

Tax Contents:

^ TopPersonal and Company Taxation

Contractors should understand margins and tax
Contractors need to understand the rules about how they are paid.

Contractor tax: limited company and personal taxes explained
Depending on how you structure your finances and your status will depend on the type and level of taxes you need to pay.

Dividends – calculation, payment and taxation
Contractors using limited company structures can get significant tax advantages by paying themselves dividends. This article explains how dividends work.

How income tax is calculated
Contractors are liable to pay tax on their total income. Calculating how much income tax a contractor pays depends on the nature of their earnings.

A guide to UK tax codes
What does your tax code mean and how does it effect how much tax you pay?

Self assessment tax for contractors - 7 things you need to know
A guide to the annual self assessment tax return for contractors.

Tax on employer provided assets and computers
Contractors using company assets for private use must obey HMRC’s rules and pay a benefit in kind (BIK) tax charge, says James Abbott of Abbott Moore.

Contractor guide to HMRC’s Real Time Information (RTI) annual scheme
Limited company contractors can now choose to submit their RTI payment submission for salary to HMRC annually, explains Abbott Moore’s James Abbott.

How do umbrellas calculate contractors’ national insurance
When contracting inside, employer's National Insurance contributions are calculated on the gross income billed to the client.

Contractor guide to the P11D - declaring benefits and expenses
ClearSky’s Derek Kelly explains why some contractors must complete a P11D for HMRC each year and the penalties for filing incorrectly or late.

Contractor guide to negotiating personal tax payments on account with HMRC
Contractors experiencing a sudden fall in income might need to reduce their payments on account with HMRC explains James Abbott of Abbott Moore.

Contractor guide to the tax treatment of loyalty schemes and benefits
Contractors can personally ‘spend’ loyalty points from business purchases without a benefit in kind tax charge, explains James Abbott of Abbott Moore.

Contractor guide to HMRC’s webinars on tax and directors’ responsibilities
Contractors, particularly those new to contracting, may find HMRC’s webinar series provides useful introductions to basic business responsibilities.

Contractor guide to answering the self-assessment tax return service company question
Contractors should answer the tax return’s service company question as leaving it out can bring unwelcome attention, warns ClearSky’s Daniel Mepham.

How National Insurance Contributions (NICs) are calculated
Contractors may be liable to pay National Insurance Contributions (NICs). Calculating how much should be paid depends on the nature of their earnings.

Tax residency rules for individual contractors and contractor limited companies
Contractors and their limited companies are subject to legislation that clarifies their tax residency status, explains James Abbott of Abbott Moore.

Oil and gas contractor guide to tax and expenses when working offshore
Oil and gas contractors working offshore are subject to similar tax and expenses rules as onshore contractors, notes Pipeline Account’s Martin Watt.

Tax breaks and allowances when buying assets like IT equipment
Contractors buying major assets such as IT equipment and commercial vehicles benefit from tax breaks and allowances, says Abbott Moore’s James Abbott.

Contractor guide to the Employment Allowance
Contractors with no income except salary could be better off by £164 per year by using the Employment Allowance, says Abbott Moore’s James Abbott.

Contractor guide to the Construction Industry Scheme (CIS)
Contractors working on construction operations or hiring other contractors might have to register for the CIS scheme, explains ClearSky’s Neil Awbery.

Marginal tax rates explained - how much tax you pay
You pay very different marginal tax rates depending on your earnings and business/personal circumstances.

What is a sole trader?
Sole traders are the simplest way of starting & running a business but are not the most tax efficient and they leave the business owner open to risk.

What is a Limited Liability Partnership (LLP)?
Limited liability partnerships (LLP) offer businesses many of the benefits of a general partnership with the limited liability of a limited company.

End of year tax return tips
Contractors can apply a range end of year tax return tips to ensure they file on time and maximise tax efficiency, says Abbott Moore’s James Abbott.

What tax code should I be on? How UK tax codes work
UK tax codes tell contractors how much tax they are paying. Limited company contractors control their tax code but it is set for umbrella contractors.

Onshore Employment Intermediaries reporting rules: contractor obligations
Contractors must supply personal data to agencies for the Onshore Employment Intermediaries reporting rules: those that subcontract are also caught.

Contractor badges of trade: HMRC rules on being in business
Contractors who demonstrate badges of trade according to HMRC’s rules are in business on their own account, explains Emily Coltman of FreeAgent.

Dividend Tax rules change 2016 - new calculations explained
Dividend Taxes changed in April 2016, adding to contractors’ tax bills – updated to include HMRC’s Dividend Allowance guidance of 17 August 2015.

Contractors who subcontract must comply with HMRC employment intermediary obligations
Contractors who subcontract are classed as employment intermediaries and must follow HMRC guidelines to ensure subcontractors pay the right tax.

Contractor guide to the digital tax accounts
Contractors will have to endure a period of transition before experiencing the benefits of the digital tax accounts, says Duncan Strike of Intouch.

Contractors filing late tax returns need to act sooner rather than later
Contractors who miss the tax return deadline need to act swiftly to avoid unnecessary additional penalties, warns James Abbott of Abbott Moore.

Manage your PAYE tax code - and don't overpay your tax
You need to monitor your tax code to ensure adjustments don’t leave you temporarily paying too much tax.

^ TopTax Inspections

Key tax penalties imposed by HMRC on contractors
From late delivery of tax paperwork to giving the wrong information – HMRC can be unforgiving and will fine contractors who don’t play by the rules.

HMRC PAYE/NI tax inspections explained
A guide to Inland Revenue tax inspections, explaining the preparation and process of the HMRC PAYE/NI tax inspection.

HMRC self assessment (SA) investigations – how they work
Explains the process of a HMRC Self Assessment investigation.

Contractor limited company VAT inspections – preparation and process
Contractors who have been selected by HMRC for a VAT inspection should not be concerned if they have stuck to the rules and are well prepared.

Minimising the risk of an HMRC investigation
Contractors can minimise the risk of being investigated by HMRC by taking simple yet effective measures, explains Abbott Moore’s James Abbott.

What triggers an HMRC IR35 investigation?
Contractors will find that a range of factors could trigger an investigation, and the days of a random inspection are long gone.

Taxman’s tactics – what contractors should look out for when an IR35 investigation looms
You should avoid trying to deal with a tax inspection without the benefit of specialist help.

Contractor guide to what information their accountants should share with HMRC
Contractors receiving HMRC information requests should seek professional assistance and not tackle them alone, says James Abbott of Abbott Moore.

Contractor HMRC inspections: do you have your IR35 life raft ready?
All contractors are HMRC investigation targets but will have nothing to fear with good preparation.

Contracting and Personal Liability Notices (PLNs) from HMRC: a contractor guide
Contractors whose limited company has unpaid NICs can be found personally liable if HMRC believes the debts arose through directors’ neglect or fraud.

Accelerated Payment Notices (APN) – guide for contractors
Contractors who have used tax avoidance schemes could receive an Accelerated Payment Notice (APN) requiring them to pay the disputed tax up front.

10 actions you can take to help you avoid a tax investigation
Contractors are often targeted for HMRC tax investigations. Here are ten actions you can take to reduce your chances of being one of the unlucky ones.

^ TopVAT

New VAT rate rules for contractors – changes due to the 20% rate from 4 January 2011
Limited company contractors will be required to change their invoices & VAT return accounting when VAT increases from 17.5% to 20% on 4 January 2011.

Contractors’ guide to VAT
VAT is a contractor’s best friend if treated right, or worst enemy unless care is taken to keep to the rules. Here’s how to keep the VAT-man happy.

Contractors’ guide to the flat rate VAT scheme
Contractors can benefit from the flat rate VAT scheme by cutting admin & potentially enjoying a cash surplus, explains Abbott Moore’s James Abbott.

Filing a late VAT return for a contractor limited company
Submitting a late VAT return or delaying VAT payments to HMRC can result in surcharges and flagging the company for inspection.

Contractor guide to the VAT treatment of umbrella expenses incurred in the Eurozone
VAT treatment of umbrella company contractors’ expenses in euros shouldn’t leave contractors out of pocket, explains Rob Crossland of Parasol.

Contractor guide to charging VAT to overseas, non-UK clients
For most contractors whether or not they should charge VAT for overseas non-UK business clients is straightforward, explains Steve Crouch from Crunch.

My fee income has dropped – should I deregister for VAT?
Abbott Moore’s James Abbott explains that contractors should deregister for VAT only when their business has changed focus, or is closing.

Flat rate VAT scheme - buying and selling assets
Contractors using the flat rate scheme for VAT should be aware of the rules about buying and selling capital items, says Abbott Moore’s James Abbott.

Contractor guide to the advantages and disadvantages of being VAT registered
Contactors unlikely to earn more than £79,000 are not required to register for VAT, but there are advantages and disadvantages to non-registration.

Create a VAT only invoice – template included
New contractors can experience delays when registering for VAT and so may have to submit a VAT only invoice to clients when the VAT number arrives.

Contractor guide to optimising VAT and the Flat Rate Scheme when starting out
Contractors can time their VAT and Flat Rate Scheme (FRS) registration to optimise VAT recovery when starting up, says James Abbott of Abbott Moore.

VAT Flat Rate Scheme – choosing the correct percentage
Contractors don’t always fit neatly into HMRC’s VAT Flat Rate Scheme Trade Sectors & choose the correct percentage, says Abbott Moore’s James Abbott.

VAT Flat Rate Scheme (FRS) - Guide to joining and leaving
Contractors joining and leaving the HMRC’s VAT Flat Rate Scheme (FRS) can time their move to maximise its benefits, says Abbott Moore’s James Abbott.

^ TopIR35

What is IR35? Does it apply to your contract?
It is tax avoidance legislation designed to ensure workers using an intermediary but who are ‘disguised employees’ pay the correct amount of tax.

Financial impact of IR35 on contractors
A contractors take home pay is reduced by up to 25% when caught.

The IR35 5% expenses rule
If you are caught by IR35 then make sure the 5% rule is used to maximise your take home pay. Here's how.

What is section 660?
What is Section 660? An overview of the legislation and how it affects contractors.

How much will section 660 cost contractors?
This article explains which contractors will be affected by Section 660 and how much it will affect them financially.

^ TopMitigating Tax

Contractor guide to tax-avoidance legislation
Contractors increasingly encounter legislation designed to tackle tax-avoidance, which has become highly complex, says Abbott Moore’s James Abbott.

Retrospective tax-reducing strategies for contractors who overpaid in previous years
Contractors can adopt tax strategies that may reduce their tax liability arising from previous financial years, says Abbott Moore’s James Abbott.

Reducing the IR35 pain with a contractor pension
Reduce the pain of it by diverting your taxes into a pension and achieve up to 48% tax relief.

Inside IR35? Get huge tax savings with a pension
If you are caught by it and currently do not have a pension, then you are missing out on huge tax savings.

Outside IR35 and no pension? Get tax savings with a pension
If you are contracting outside and don’t have a pension, you are missing out on significant tax savings.

Childcare vouchers can cut contractor tax liabilities
Limited company and umbrella company contractors with children can reduce tax bills by claiming childcare vouchers, explains Clair Jolly of Danbro.

Contractor guide to tax credits from HMRC: working tax credit and child tax credit
Contractors can qualify for tax credits from HMRC and should submit a claim in case their income unexpectedly falls, says Abbott Moore’s James Abbott.

Contractor guide to the General Anti-Abuse Rule (GAAR)
Contractors should take into account the General Anti-Abuse Rule (GAAR) when making tax-planning decisions, says James Abbott of Abbott Moore.

Contractor guide to wills and inheritance tax (IHT) planning
Contractors seeking to minimise inheritance tax should ensure they have a will and start planning early, says Abbott Moore’s James Abbott.

Difference between tax avoidance and tax evasion
Contractors can use strategies for tax avoidance as the practice is perfectly legal, whereas deliberate tax evasion is illegal and a criminal offence.

Contractor tax avoidance schemes – understanding the benefits and risks
Contractors entering into tax avoidance schemes might find that they work, but there can be many pitfalls, as James Abbott of Abbott Moore explains.

Contractor tax avoidance schemes – an overview
Contractor tax avoidance schemes are worlds away from the schemes used by corporates and the wealthy – and some of them work, says David Colom of DJ Colom & Co

Dividend Tax changes – how contractors can mitigate their impact
Contractors can use strategies that mitigate the impact of the Dividend Tax changes announced in the Summer Budget, says Abbott Moore’s James Abbott.

Moving buy-to-let properties into a company - issues to consider
Contractors might be able to mitigate the impact of buy-to-let tax changes by putting rental income into a company, says James Abbott of Abbott Moore.

^ TopTax Tables

Tax Tables:

2015 | 2011 | 2007
2014 | 2010 | 2006
2013 | 2009 | 2005
2012 | 2008 | 2004