Whether you’re an experienced contractor or freelancer or just starting out, there are some tax issues you need to consider. The rules for self-employed people in the UK are slightly different to the rules for people in regular employment. One of the differences is that, if you’re freelance, you need to know what kind of freelancer you are. Does your business mean that you need to register a company, or are you self-employed as a sole trader, meaning that you don’t need a company?

You also need to consider the issue of Value Added Tax to work out if you need to register for it or not. You won’t have to register for VAT if you’re on low to average earnings, but if you’re a high earner on over £64,000 a year then you need to register for it. This is something you can get an accountant to help you do and you might want to separate the VAT when sending invoices. This is so you can collect and claim for VAT.

National Insurance contributions are another tax issue you need to make arrangements for. Specifically, you need to make plans to pay Class 2 NI contributions, unless you have very low earnings which exempt you from paying it. Most people set up a direct debit with Her Majesty’s Revenue and Customs to pay for it on a monthly basis. If you earn a lot, you’ll also have to pay higher rate NI contributions, which lower earners can pay on a voluntary basis.

The self-assessment tax return is the cornerstone of tax issues for UK freelancers and contractors. The assessment runs yearly from April – April, which is based on the workings of the financial year. How much tax you’ll have to pay depends on how much you earned in that year. This means you need to keep detailed records of how much you’ve earned and the costs you’ve incurred as part of your work to input them into the form for HMRC to calculate your tax.

One last thing to consider is how you’ll be paying your tax bill. It can be a good idea to have a cushion of money put by in case the following tax year is a bit lean and you don’t earn much as you’ll still be expected to pay the tax bill for the previous year. It can also be wise to put aside money throughout the year so that when tax time rolls around, you’ll have enough saved that you’ll be able to pay is easily.

Learn More : Contractor Umbrella Company Or Contractor Tax