Tax Planning for Contractors

Chawton Hector > Services > Tax Planning for Contractors

Tax Planning for Contractors

Life as a contractor can be challenging in so many ways.  We’re just the people to hold your hand through the maze that is Tax Planning for Contractors.

But to start you off, here are a handful of tips to help you get your head around efficient tax management through your Limited Company.

7 great tax tips for tradesmen and contractors

  1. Avoid National Insurance contributions
    Why pay National Insurance if you don’t have to? Operate through a Limited Company by taking a low salary from your company and then taking the rest of your pay as shareholder dividend.
  2. Claim tax relief on all expenses
    Receive 20% corporation tax relief on your allowance expenses. It’s important to claim for all allowable expenses, such as accommodation, mileage and any other expenses that are solely for the business.
  3. Keep on top of your company’s tax position
    After your salary and expenses are taken out, calculate your company’s profit. You’ll need to take in to account corporation tax and VAT too, as all the funds in the company account aren’t yours to take. Then you’ll know your company’s profit after tax, which will be yours to take as a dividend.
  4. How much dividend can I take?
    It’s best not to take all the company’s profits as dividends – this isn’t always tax efficient. Of course, you must take what you need, but be careful not to exceed the higher rate of tax as you’ll be paying more tax than you want to.
  5. Register for the Flat Rate Scheme for VAT
    If you’re on the flat rate scheme for VAT, you can make thousands of extra income. If your turnover is below £150,000 and you provide a service, incurring very few expenses that include VAT, then register immediately.
  6. Buy a company mobile phone
    HMRC will allow you to provide your employees with a mobile phone as a tax free benefit. This could be for both personal and business use. You’ll earn Corporation Tax relief and your personal tax won’t be affected.
  7. Throw a staff party!
    Time to celebrate! Each year HMRC allows you to pay for a staff party! You’ll receive tax relief on up to £150 per employee. This can be any time of year – not just Christmas. So – what’s stopping you?

GET IN TOUCH

So, there you go. 7 great tax tips for contractors. But they’re just the tip of the iceberg. Contact us today to find out more about we can help you with your tax planning.



Your details are safe with us and won't be shared with third parties. Read our Privacy Policy