How a contractor accountant can help you
“I’m going to become self-employed so that I can do my own accounts. I love paperwork, spreadsheets, and complex legislation,” said no one ever as they embarked upon their career as a contractor.
That being said, many contractors starting out decide to do their accounts themselves. After all, most people when becoming self-employed want to keep their expenses low so an accountant feels like a luxury they can’t quite splash out on yet. And at first, it’s fairly straightforward, but as you get busier it becomes more of a struggle to keep everything up to date, to keep track of receipts and invoices, and to monitor all of those changes in legislation. This is where a contractor accountant can help. They’ll handle everything for you – all you have to do is keep track of your incomings and outgoings and they’ll calculate everything, make sure you’re paying what you need to and keep track of all those pesky regulations for you. Of course, you’ll have to weigh up for yourself if you want to (or can justify) paying for an accountant. In this blog, we take a look at what a contractor accountant could take off your plate.
HMRC enquiries and correspondence
Hate having to deal with HMRC? Quiver with fear whenever those brown envelopes plop through the door? You’re not the only one. But a contractor accountant can handle all of that for you. Any enquiries to HMRC, any correspondence that needs dealing with would go through your accountant, and you’d be informed of whatever you need to know without all the complicated jargon.
Annual accounts and dividend calculations
If you operate as a limited company, you’ll have annual accounts and dividend calculations to deal with every year. This can be time-consuming, complex, and rife with room for error. It can be pretty daunting for contractors who may well be afraid of making a mistake and ending up on the wrong side of a HMRC investigation. Having a contractor accountant means that a) they deal with this for you, and b) you can be confident that they know what they’re doing. They have studied for this, after all, and are experts in their field. They’ll understand every allowable expense inside out, so you won’t accidentally write off something that shouldn’t be written off, and won’t claim too much or too little in terms of dividends.
Income tax self-assessment
While being a sole trader means slightly simpler taxes over operating as a limited company, it’s still something of a minefield – again, giving contractors the fear that they’ll make a mistake and end up owing HMRC a fortune. A contractor accountant can help you navigate this, ensuring that everything on the self-assessment is accurate and that you are declaring the correct amounts and paying what you owe. Plus it gets you a few hours of your life back every year.
Keeping track of changes to legislation
IR35 is one very obvious example of changing legislation affecting contractors, complete with delays, new start dates, and a lot of confusion. But it’s certainly not the only example. For instance, did you know that the government’s much-vaunted Making Tax Digital (MTD) scheme has been delayed until 2024? No? You and probably quite a few other contractors – it hasn’t exactly been all over the mainstream news. However, an accountant would have been well aware of it and would be able to advise you accordingly. They would also be able to help you prepare for when MTD does eventually come into effect – much better than going it alone and having to go through all of the legislation and new guidance yourself.
While the changes to IR35 legislation – brought in in April 2021 – have had many contractors and end clients in a bit of a flap, for some contractors they haven’t made a blind bit of difference. That’s because they only apply to (and this is putting things very simply) contractors working for medium or large clients who have operations in the UK. If your clients are overseas with no UK branch, or they are a small business, you remain responsible for declaring your IR35 status, just as you were before. However, there are a lot of complex definitions to work through in deciding whether or not the legislation applies to you. An accountant, however, will be able to work this out for you quickly and painlessly.
For more information on IR35 or contractor insurance, you can speak to our friendly and knowledgeable team of contractor insurance experts by contacting us directly.