Common tax mistakes made by self-employed contractors
by Vidit Agarwal Marketing Director Behind every successful business is an entrepreneur who pays precise attention to detail. However, whether you are an independent contractor or the head of a small start-up, you will have to deal with the pain of taxes. While most entrepreneurs have an excellent skill set to promote and sell their services, still most of them tend to make mistakes while filing their tax returns. The consequences of these mistakes can be highly unpleasant and expensive. Avoiding these five mistakes will ensure that you don’t fall into any trouble.Not applying for
self-assessment: You
must register yourself with HMRC if you earn more than £1,000 in one or more
transactions. People have the misconception that it is their basic allowance
and there is no need for registering with HMRC. It is important to note that
even if you earn below the personal allowance (i.e., £12,000 for the 2020/21
tax year), you still have to declare your earnings. This can only be done after
you register yourself as self-employed.
Delaying self-assessment tax return: Not respecting the
deadlines is one of the most common tax mistakes. The deadline for filing self-assessment tax returns is January 31 for online applications and October 31 for
paper tax returns. Missing these deadlines can attract penalties for both; late
filing and late payment of personal tax
returns. Missing the deadline by one day will cost you £100, and it
will continue getting worse every day.
Not
saving for a personal tax return: Not
having proper funds to pay taxes can be very problematic, especially if you
have forgotten about National Insurance Contributions. Keeping aside a portion
of your earnings is the best thing you can do to avoid last-minute stress.
Create a separate tax savings account and don’t touch it till the deadline.
Misreporting earnings: If
the HMRC finds out that you have deliberately misreported your earnings, you
can be fined up to 100% of the extra tax owing. Keeping records of all invoices
and receipts can help you avoid many problems as HMRC can ask you for proof
and evidence anytime. Also, keeping records will decrease the chances of potential
misreporting.
Not contributing to
National Insurance:
Depending on how much you earn, these are the
two types of national insurance.
Class 2- for-profit above £6,475 a year
Class 4- for-profit above £9,501 a year
The
most convenient way to avoid these mistakes is by hiring a tax
return accountant in South end on sea. If you have the resources, you
should outsource all your accounting and tax duties to an expert accountant.
This is the best thing you can do for your business to give it an extra growth
boost. The accountant will also help you in financial forecasting and growth
planning while ensuring you have enough time to focus on tasks other than accounting.
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Created on Nov 17th 2021 07:09. Viewed 287 times.
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