Keeping on top of your taxes is one of the most important aspects of running a business, but for the self-employed, taxes often fall to the bottom of the to-do list when there are so many other things that need to be done.
For many people doing their tax returns, their biggest worry is making a mistake when calculating how much they need to pay and end up getting a fine later down the line. However, what people don’t consider is whether they’re paying too much tax, which in some respects is an easier mistake to make.
Are you paying too much?
Many contractors use the Contractor’s Industrial Scheme (CIS). This means that they deduct 20% off what they pay to subcontractors—like carpenters, tilers and electricians—and give it to HMRC on their behalf. Although the contractor pays the tax on their behalf, this often means that the subcontractors are paying too much tax. So even though it’s easier in some ways, it does make it difficult in claiming a rebate.
“The other thing to watch out for is are whether you’re taxing your profit or your earnings,” Jason continued. “Because that’s the difference between a business and a sole trader. If you’re self-employed then you only pay tax when you make a profit on the business – not on your earnings.”
Saving on your tax bill
When you own your own business you’ve got to consider your overheads. If you’re working from home, running the business, buying equipment, printing etc. When you work for someone that’s all provided for you, but not for the self-employed, so these count as business expenses.
Of course, it’s important to be fully aware of what you can and can’t claim as an expense, as well as keeping your books in order. As well as saving you time, a good accountant may even be able to save you money. For more information about how you can save money on your tax bill, call 01691 774431 or book a free consultation online at www.jervisaccountingservices.co.uk.