That got your attention didn’t it? Most freelancers, contractors and single person limited company owners struggle to keep 70% of their turnover.
The majority of business owners, especially new company owners, do their own accounts. Often they start doing this because they do not have the resources to hire an accountant. As their business grows and they begin to earn more they tend to carry on doing so, after all most contractor or freelance accounts are not complex or difficult to keep track of. You are paid a wage, and maybe a dividend, deduct your expenses and that is the income on which you pay tax.
Simple, or so it seems, unfortunately limited company accounting is far more complex than people realise. If you are a small one-person firm providing a service, with a low turnover, things are not too bad. Basically, you pay your income tax it is as simple as that. A professional accountant is not likely to be able to save someone like this much money.
Things get far more complicated once your turnover reaches the point where you have to charge VAT or start paying corporation tax. That is when things get far more complex, and doing your own accounts starts to become a false economy. At this stage, a professional accountancy firm can save you thousands in tax every year and, importantly, do so legally.
Staying legal
Professional contractor accountants understand the complexities of the various tax laws, which enables them to show you the best way to navigate the tax system and do so legally. Staying legal is particularly important if you are a contractor or freelancer. This is because the buck stops with you. If you make a mistake, end up doing something illegal, and upset the tax authorities, you, and only you pays the fines and deals with the fall out. Employing a professional can help you to keep more of your hard-earned cash and ensure that you never fall foul of the tax authorities.
Over the past few years, this has become even more important. In the past most people who worked as consultants, IT contractors or building contractors in the UK opted to work under an umbrella company. This helped them to continue to legally work as a freelancer and benefit from a better take home pay than they would if they were employed as regular employees.
Unfortunately, over the years, the tax rules have changed, and some umbrella companies have started to ask for higher fees. There are many hidden costs and now it can be quite tricky and work out expensive to work under an umbrella company, so there is renewed interest from contractors and freelancers in using traditional accounting methods.
New opportunity?
The accountancy industry has realised this and are responding to this emerging business opportunity. Those contractors and freelancers that earn an average of £50,000 or more can benefit the most from switching to a new way of paying their tax. You can find out more about this innovative way of handling limited company accounting by clicking this link.
