If you have chosen to become a limited company contractor, it is likely you are earning more than you would be as a salaried employee or if you had pursued an alternative method of working on a freelance basis, such as employment under an umbrella company.
This is because working in this manner allows contractors to legally minimise their tax and National Insurance burden by withdrawing a minimal salary from the company and accessing additional funds from the profits in the form of shareholder dividends and directors’ loans.
However, many of those who choose to become a limited company contractor soon discover this method of working requires a significant amount of paperwork and accountancy tasks to be completed and this can become overwhelming for some – particularly if they have no previous experience of bookkeeping.
After registering with Companies House and informing HM Revenue and Customs (HMRC) of your intention to operate as a limited company contractor, you will be provided with a Unique Taxpayer Reference and will be informed of what is required of you – which is the point at which many become daunted by the potential level of paperwork.
HMRC has a number of things it expects from you, not least of which is a Company Tax Return. Many contractors seek to complete this without assistance, but in order to do so, often have to clear their diaries for several days.
This means they are losing out on income as they are not completing contracts and it is therefore often more financially beneficial to enlist the help of a company dedicated to providing such help to contractors.
These professional accountancy services firms – more details on which can be found here – have a wealth of experience in dealing specifically with limited company contractors and are on hand to provide all the assistance you may require.
HMRC insists that all limited companies keep detailed, accurate accounts for each financial year and may request to see them at any point in a five-year period – meaning it is therefore necessary to store them for this period of time.
Even if you opt not to seek professional help, one small change that may make a significant difference to this process is to store these details electronically. There a number of software packages available that will make this process simple to do and this means you are not required to keep the paper copies.
Unless you are a qualified accountant, it is unlikely you will have any experience in bookkeeping, accounts or taxation and this is where assistance from accountancy services providers can be invaluable.
This will ensure you are compliant with all rules and regulations, that you are tax efficient and assist you in claiming the tax relief on allowable expenses.
While many contractors are reluctant to pay for accountancy services, you could even save money this way as there are likely to be several examples of expenses you are entitled to claim tax relief on but are not aware of.
Furthermore, most people choose contracting because it is a way of life that offers more freedom. If you feel this is not the case because of the amount of paperwork and administrative tasks you are required to complete, accountancy assistance will prove invaluable in offering you this back.