A building contractor’s guide to the new tax year

A building contractor’s guide to the tax year

There is no doubt that self-employment is on the rise and with a record 15% of people in the UK now working for themselves, it’s difficult to deny the benefits that come with taking matters into your own hands and going it alone.

In 2014, the Office for National Statistics reported that 167,000 construction professionals working in the UK were self-employed, which proves that more and more people with the education and skills to work in building and engineering are choosing to work for themselves.

If you’re thinking of taking the first step on a new path of your career, then you may already know that there is a lot to learn about becoming self-employed.

One of the trickiest parts of the job, particularly for those first starting out, will be getting everything straight with the tax man.

As a PAYE (pay as you earn) employee, you may barely have given a second thought to your taxes but when working for yourself, it’s important that you are aware of the key tax dates throughout the financial year.

Where to start

As this infographic by accountancy firm Quantic UK shows, ultimately the amount of tax that you have to pay depends on your working circumstances.

If you’ve made the decision to register with HMRC as a sole trader, all you have to do is submit a Self-Assessment Return by the end of each January if you’re submitting online.

Paper-based returns must be made by the end of October.

If you’re registered as a limited company, your tax returns become a little more complicated. One of your obligations will be to make sure that your corporation tax contributions are made nine months and one day after the company’s financial year has ended.

This is why it is essential for self-employed constructions to stay on top of their dates.

Of course, George Osborne recently announced that tax returns will be scrapped by 2020 in favour of a real-time accounting system where a person’s details are automatically lodged with HMRC.

However, until then it’s crucial that building contractors are fully up to speed with the UK’s annual tax calendar.

Dates for your Diary

The tax year doesn’t just start and end on 5th April.

There are many more important dates in between that you need to be aware of when it comes to getting your tax returns done on time.

Read on for our handy guide on the key dates you need to know.

• 5th April – This date marks the official end to the tax year and once it arrives, the clock is ticking on those who are self-employed as you have just under nine months to get your digital tax return filed.
• 31st July – By the end of July your second payment on account will be due for the previous year. Two payments on account must be made every year unless you have already paid at least 80% of your owed taxes, or your last self-assessment amounted to less than andpound;1,000.
• 5th October – By this date you should have informed HMRC about any earnings that have not already been subjected to deductions from the previous tax year.
• 31st October – As mentioned earlier, this is the deadline for paper-based tax returns to be submitted.
• 6th December – As a limited company, if your financial year runs alongside the official tax year, then this is the deadline for paying your corporation tax. However, this date may vary from business to business depending on when your financial year starts and ends.
• 30th December – If you owe HMRC less than andpound;3,000 then you will be able to pay your self-assessment bill by using your tax code, but it must be completed by this deadline.
• 31st January – This is the deadline for self-assessments for the previous year to be submitted online. It’s not uncommon for people from all industry sectors to make a panic-stricken last-minute dash to file their returns before they incur a financial penalty.
• 5th April – The tax year comes to an end. Again, if your company’s financial year runs alongside the tax year, then your limited company will need to file a tax return, which must be completed every 12 months.

With the number of self-employed workers on the rise, HMRC is cracking down on those who file late so it’s important that you take note of the dates listed above to avoid the andpound;100 fine that is incurred through missing a deadline.

With the outlook for UK construction brightening of late, there will be more opportunities for contractors to take advantage of, but don’t forget that working for yourself isn’t all sunshine and rainbows.

You need to be aware of your tax obligations, as HMRC will not accept ignorance as a legitimate excuse for non-compliance.

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Sources

• http://www.ft.com/cms/s/0/3b015100-c805-11e4-9226-00144feab7de.html#axzz3UeUWL3o4
• http://www.ons.gov.uk/ons/dcp171776_374941.pdf