LITRG release tax tips to help self-employed

(3 minutes to read)

The LITRG has published a new guide to help the UK’s self-employed workers to better understand the tax system.

With latest findings showing that many low income self-employed people don’t fully understand their tax position, the LITRG has published a helpful guide.

ONS figures revealed that the last ten years have seen a significant rise in the number of people joining the contracting sector, many of whom earn a low income, perhaps work in the ‘gig economy’ and are unable to afford paid tax advice.

As a result, the Low Incomes Tax Reform Group (LITRG) has created a guide that explains some of the less common tax rules affecting the self-employed; discussing areas such as how to prepare accounts and a self-assessment tax return, tax allowances, partnerships, taking on staff and registering for VAT, and the tax responsibilities when a business ceases to trade.

Head of Team at LITRG Victoria Todd, commented, “We are concerned that some self-employed people may struggle to get their tax affairs correct because of the UK’s complex tax and benefit rules which seem to be changing constantly, coupled with a reduction in detailed guidance from HMRC. Most self-employed workers want to get their tax right and our online tax guide will help them with the difficult task of staying on top of changes to the tax system while running a business.

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“There have been some important changes to the tax system in recent years that affect low-income self-employed workers, with the introduction of the trading allowance, cash basis and simplified expenses, as well as the start of HMRC’s Making Tax Digital for VAT programme. There are also significant changes to the benefits system with the introduction of universal credit which is replacing tax credits, among other benefits.”

LITRG’s five tax tips for low income self-employed:

  1. We strongly recommend that you understand your employment or self-employment status before you start work because if you are self-employed you will have no entitlement to any employment rights, which include rights like paid holidays and sick leave; and you will have to take full responsibility for your tax affairs.
  2. It is very important that you keep personal transactions (such as drawings) separate from your business transactions – although this does not necessarily mean that you need to have a separate business bank account (depending on your bank’s terms and conditions).
  3. If you want to keep things simple use an accounting date of either 31 March (if you prefer to work in whole months) or 5 April so it matches the tax year.
  4. It can be quite a shock to your cash flow when you first move to payments on account. It may help you to put a certain amount each time you are paid into a different bank account. Remember you will need to save an additional amount for the first time you move into the payments on account system as you will be starting to pay your tax earlier.
  5. Do not forget to notify HMRC (for tax credits), DWP (for universal credit and other means-tested benefits) or your local authority (for housing benefit and council tax reduction schemes) if you have stopped being self-employed.

To find out more about contracting please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com

Why Dolan Accountancy?

Dolan Accountancy was set up by Simon J Dolan, the man behind the well-known brand SJD Accountancy. With over 25 years experience in the contracting marketing, Dolan Accountancy has the heritage, reputation and credibility you can trust. Working closely with our sister company, ContractorUmbrella, it means we can offer one low cost, fixed fee package at £95 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of ContractorUmbrella – With changes in Public Sector IR35 Legislation we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, ContractorUmbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

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