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Attention all Accountants!! Help required.



dadams2k11

dadams2k11

ID10T Error
Jun 24, 2011
4,947
Brighton
I need some advice on paying tax and when to pay it.

I stated doing IT contracts last year so set up a company in November 2013 in order to get paid instead of using an umbrella company.

I not quite sure what tax I need to pay and when it needs to be paid. I am paid at a day rate so my earnings are the same every week.

I've been told different things by different people but would like to know from someone that actually knows the facts.

Do I pay corporation tax and do a self assessment?

Do I pay myself NMW and tax my self on that then take the rest in dividends?

Im also wondering what the going rate is for an Accountant to sort my files?

Muchas Gracias in advance.
 




Hugh'sDad

Hugh'sDad

New member
Nov 29, 2011
577
'Ove
dadams2k11 said:
I need some advice on paying tax and when to pay it.

I stated doing IT contracts last year so set up a company in November 2013 in order to get paid instead of using an umbrella company.

I not quite sure what tax I need to pay and when it needs to be paid. I am paid at a day rate so my earnings are the same every week.

I've been told different things by different people but would like to know from someone that actually knows the facts.

Do I pay corporation tax and do a self assessment?

Do I pay myself NMW and tax my self on that then take the rest in dividends?

Im also wondering what the going rate is for an Accountant to sort my files?

Muchas Gracias in advance.
Click to expand...

Please send 50 guineas in an envelope........for that I'll give you my 0870 enquiry number
 


CheeseRolls

CheeseRolls

Well-known member
NSC Patron
Jan 27, 2009
5,952
Shoreham Beach
dadams2k11 said:
I need some advice on paying tax and when to pay it.

I stated doing IT contracts last year so set up a company in November 2013 in order to get paid instead of using an umbrella company.

I not quite sure what tax I need to pay and when it needs to be paid. I am paid at a day rate so my earnings are the same every week.

I've been told different things by different people but would like to know from someone that actually knows the facts.

Do I pay corporation tax and do a self assessment?

Do I pay myself NMW and tax my self on that then take the rest in dividends?

Im also wondering what the going rate is for an Accountant to sort my files?

Muchas Gracias in advance.
Click to expand...

It sounds like you need an accountant, rather than just some advice. I suspect that the reason that you are getting conflicting advice, is that no one solution works best for everyone. It really does depend on your circumstances. My accountant charges around £90 per month, for basic accounting. Have a search through the threads on here, there have been a number of accountants recommended for this type of work.
 


Badger

Badger

NOT the Honey Badger
NSC Patron
May 8, 2007
12,780
Toronto
I started contracting last April so I'm in the same position, I can give you a few pointers (I assume you have a limited company).

Is your company VAT registered? In which case you should be paying VAT on a QUARTERLY basis, HMRC will send you a letter if you're late.

All other tax for 2013/14 will be submitted/paid at the end of this year/start of next year.

You pay yourself a gross salary and dividends i.e. all the money goes into your personal account and submit your personal self assessment against this (so put a large chunk in savings)

The business tax is a separate submission you make for your company.

In terms of paying yourself you can get away with a minimal salary and large dividends but you need to make sure your contracts don't fall under IR35.



I use a company called Crunch for about £70 a month, they give you access to online software to enter all your sales and expenses to do all the calculations for you plus you get access to an accountant to ask any questions you want.
 








S

Shropshire Seagull

Well-known member
Nov 5, 2004
8,500
Telford
I've been IT contracting for about 8 years now. Gives me great work / life balance and freedom.

Definitely find yourself an accountant that is local so you can pop in, phone, email, etc any questions as they arise.
I also assume you are set up as a limited company?

Keep all your receipts - anything that is wholly relevant to running your business is tax deductible so will reduce your corporation tax liability.

If not already, get VAT registered and joint the "flat rate scheme" and also the "annual accounting scheme" - if you invoice £100k pa this will gain you £2.6k which will more than cover the cost of an accountant - I pay my accountant £1k pa. This VAT method is VERY simple and ideally suited to business' like ours - basically, you add 20% to your invoice [day rate x days] and this gets paid into your business bank account [Santander do free business banking] - then you are liable for 14.5% of your invoice total to pay back in VAT [so you are always up] - the annual accounting scheme allows you to pay by monthly standing order to spread the cost and avoid a big hit at year end.

Pay yourself a salary - how much is up to you, but your accountant can advise - mine recommended £600 per month as the most tax efficient amount. HMRC will provide you with a simple little program called Basic PAYE tools and this will run your payroll. Your company will have to pay the PAYE deducted to HMRC - usually quarterly - mine's normally about £90.

As a director of a company, HMRC will ask you to complete an annual Self Assessment just to make sure they have collected the correct personal tax off you.

Simple guideline - minimise your net profit to minimise your corp tax - but keep it legal. Corp tax is 20% of your net profit.

If you are thinking of doing this long term look to set up a pension scheme through your own limited company as this can also create [legal] tax advantages.

Main point, use an accountant and this will make sure you are on the straight and narrow - I had a VAT inspection last year and the VAT man wanted to come to my house [as its the registered office of my company]. My accountant let me use there premises and were on hand to deal with any issues - sailed through no problem - worth their payment - I can sleep at night knowing I'm not going to get duffed up by HMRC.
 
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dadams2k11

dadams2k11

ID10T Error
Jun 24, 2011
4,947
Brighton
Thanks for the helpfully replies.

I'm not VAT registered as I basically get paid every week and yes Ltd company.

I have heard good things about crunch so may give them ago unless there is any accountants willing to help me on here?
 




S

Shropshire Seagull

Well-known member
Nov 5, 2004
8,500
Telford
dadams2k11 said:
Thanks for the helpfully replies.

I'm not VAT registered as I basically get paid every week and yes Ltd company.

I have heard good things about crunch so may give them ago unless there is any accountants willing to help me on here?
Click to expand...

If you are operating as a limited company then you are issuing an invoice to get paid by, yes?
So register for VAT [costs nothing], add your VAT reg number and 20% to your invoice.
Joint the flat rate scheme [also costs nothing] and then make some money out of HMRC - the admin overhead is negligible, the gain can be sizable - to estimate your gain, multiply your day rate by the number of days you expect to work each year, then times by 2.6% - that is how much free VAT money you will be getting per year.

Having a VAT number can also have a side-benefit - e.g. there are some cash 'n' carry's that only let you buy from them if you're VAT reg'd - cost nothing, so nothing to loose.
 




Weststander

Weststander

Well-known member
NSC Patron
Aug 25, 2011
63,974
Withdean area
Vat - in your case it looks fine, but not every business under the vat threshold of £79k should rush into registering just because of the flat rate scheme. If you are in retail, b&b/guest house, plumbing/heating engineer, jobbing builder etc, where your customers are the public or non-vat registered business .... In unnecessarily registering for VAT you've just added 20% to your pricing/prices, or more likely you've wiped out 1/6 of your gross income as you won't be able to price higher but will have to pay vat to HMRC.

Accountants - try Cardens of Hove (739592) who have a fantastic reputation and many Sussex-based businesses / one man bands who are satisfied with their fixed fees.

Whoever you choose, get an e-mailed/written fixed quote to include all the following, if applicable:
Monthly payroll including RTI
Quarterly VAT
Annual full financial statements and abbreviated accounts
CT600 and corporation tax computation
Personal self assessment return
Calculating regular dividends and issuing the documentation

Sounds a lot, but an efficient modern firm of accountants will be used to all that, for a modest fixed fee.

Bookkeeping - try to do it yourself to save money. Easy if you have a system and keep on top.
 




Gazwag

Gazwag

5 millionth post poster
Mar 4, 2004
30,145
Bexhill-on-Sea
Shropshire Seagull said:
If you are operating as a limited company then you are issuing an invoice to get paid by, yes?
So register for VAT [costs nothing], add your VAT reg number and 20% to your invoice.
Joint the flat rate scheme [also costs nothing] and then make some money out of HMRC - the admin overhead is negligible, the gain can be sizable - to estimate your gain, multiply your day rate by the number of days you expect to work each year, then times by 2.6% - that is how much free VAT money you will be getting per year.

Having a VAT number can also have a side-benefit - e.g. there are some cash 'n' carry's that only let you buy from them if you're VAT reg'd - cost nothing, so nothing to loose.
Click to expand...

You seem to ignore the fact that adding VAT to your income could either make you too expensive for your clients or hit your profit margin if your your clients/customers are no vat registered, bit too generalised to suggest everybody shoudl register for VAT
 




Leighgull

Leighgull

New member
Dec 27, 2012
2,377
I like your style mate. Rather than pay for professional advice from a fee charging accountant post a detailed tax query on a football message board and place some exclamation marks after it.

With that kind of planning and acumen your business must succeed. I expect Alan Sugar started off in the same way...except in his day he probably put a postcard in the window of a newsagents on the seven sisters road when Spurs were playing at home.
 




Westdene Seagull

Westdene Seagull

aka Cap'n Carl Firecrotch
NSC Patron
Oct 27, 2003
21,019
The arse end of Hangleton
dadams2k11 said:
I need some advice on paying tax and when to pay it.

I stated doing IT contracts last year so set up a company in November 2013 in order to get paid instead of using an umbrella company.

I not quite sure what tax I need to pay and when it needs to be paid. I am paid at a day rate so my earnings are the same every week.

I've been told different things by different people but would like to know from someone that actually knows the facts.

Do I pay corporation tax and do a self assessment?

Do I pay myself NMW and tax my self on that then take the rest in dividends?

Im also wondering what the going rate is for an Accountant to sort my files?

Muchas Gracias in advance.
Click to expand...

www.crunch.co.uk - all the help you require and at a very good price.
 


S

Shropshire Seagull

Well-known member
Nov 5, 2004
8,500
Telford
Gazwag said:
You seem to ignore the fact that adding VAT to your income could either make you too expensive for your clients or hit your profit margin if your your clients/customers are no vat registered, bit too generalised to suggest everybody shoudl register for VAT
Click to expand...

If you are invoicing a company who are VAT registered it makes no difference to them as they can claim the VAT back - if dadams is IT contracting this will almost certainly be the case. Fully agree that if the customer is not VAT registered this could have the effect of being 20% more expensive.

I was suggesting dadams registered for VAT, not everyone - since he is in IT contracting [same as me] - sorry I didn't make this clear.
 


Weststander

Weststander

Well-known member
NSC Patron
Aug 25, 2011
63,974
Withdean area
Shropshire Seagull said:
If you are invoicing a company who are VAT registered it makes no difference to them as they can claim the VAT back - if dadams is IT contracting this will almost certainly be the case. Fully agree that if the customer is not VAT registered this could have the effect of being 20% more expensive.

I was suggesting dadams registered for VAT, not everyone - since he is in IT contracting [same as me] - sorry I didn't make this clear.
Click to expand...

Not necessarily. I know IT contractors who provide services to VAT exempt sectors like much of financial services, where the customer cannot get the input VAT back at their end, and so he would add 20% to their costs or have to reduce his prices by 1/6 to match the price before he registered for VAT. There are other sectors too.
Just needs checking in each case, before having tunnel vision for the cash benefit of registering for VAT to gain the flat rate benefit.
 


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