close menu

7 in 10 contractors are stressed out by their accounts. Don't be like them.

by Kobus Van den Bergh | May 09, 2018
  • Self-employed individuals are the fastest growing section of the UK workforce. However, a recent survey of self-employed UK contractors found that, surprisingly, almost three quarters do their own accounting. The survey also found that doing your own accounts can lead to a lot of gnashing of teeth and incorrectly filed returns. Luckily, as with most things in life and business, there is a solution.
    stressed-out-man

    Why everyone is getting stressed out about accounts

    In a survey conducted by SJD accountancy, only seven per cent of the contractors said they employ a specialist accountant to do their accounts. Of the contractors who do their own accounts, seven in 10 said it causes them stress. When asked what the most stressful thing about doing their own accounts is, the responses were varied:

    • 35% said they worry about making costly accounting errors
    • 15% said the time it takes
    • 13% said the complexity of the process
    • 5% said they were worried about financial penalties

    From where I sit, these numbers are not surprising. Accounting law in the UK is complex, especially for contractors. To successfully file your accounts you need to understand IR35, Corporation Tax and the pros and cons of working through a limited company.

    One small error can result in hundreds of Pounds in tax lost to HMRC unnecessarily. It’s little wonder contractors get flustered and stressed when their tax returns are due.

    It’s not all doom and gloom, there are solutions

    Take home more pay with a limited company

    One of the major benefits of working as a contractor in the UK is that you can run your business as a limited company. While sole traders pay Income Tax, limited companies pay Corporation Tax on their profits.

    Corporation Tax is set at 19% for the current tax year, with the government aiming to cut it down to 17% by 2020. The basic Income Tax rate is 20%, while the higher rate is 40%. This means that you can significantly reduce the amount of tax you pay to HMRC if you structure your earnings within a limited company correctly.

    This is especially true for higher-earning contractors. If you earn £200 a day (equating to about £50,000 per annum) then using a limited company is an absolute no brainer. Take a look at the illustrative comparison below.

    SACC_Infographic_2018-05

    Ensure your contracts are outside of IR35

    IR35 legislation is designed to ensure that only contractors who are truly self-employed receive the relevant tax breaks. If a contract between an employer and a contractor seems to set up some sort of ongoing relationship, the contractor could be liable to be taxed as if they are an employee (i.e. at a higher rate).

    You could potentially lose 25% of your earnings if you are deemed an employee, so it’s vital that you get your contracts correctly assessed. What’s more, if you’re found to have been paying tax incorrectly, you will be liable for interest and penalties on further tax and NI contributions.

    Get help where it’s important

    While it’s possible to do your own accounting, it’s not easy to run your contracting business as well as keep abreast of all the ever-changing HMRC and Companies House requirements and deadlines. By hiring a reputable accountancy firm to ensure you remain 100% compliant, you can stay in HMRC’s good books and save valuable time that could be spent furthering your career.

    See also: Reduce your accounting fees and still get the help you need

    Although many people think that they have to hire an accountant who they meet with on a regular basis to assist them with their accounts, this isn’t the only option out there. There are also simple, online accounting packages that don’t break the bank but still ensure that you meet all your accounting deadlines and have a specialist accountant just an email away should you have any queries or concerns.


    We offer a Basic Online Package that is designed for contractors able to do some accounting themselves and looking to save on accountancy fees, but still get the help they need. Simply send us an email or fill in the form on this page to get started.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

    • Business-concept
      Moving your business to the UK? You’ll need to understand the UK’s VAT regulations
      Nov 12, 2018  |  by Scott Brown
    • Autumn-statement-banner-no-logo-white
      Highlights from the 2018 Autumn Statement
      Oct 30, 2018  |  by Scott Brown
    • man-in-front-of-shop
      A quick guide to UK business tax
      Oct 26, 2018  |  by Scott Brown
    • working-man-contractor
      Self-employment vs. contracting in the UK: What’s the difference?
      Oct 11, 2018  |  by Kobus Van den Bergh
    • man-relaxing
      Why your SME needs management accounting
      Oct 10, 2018  |  by Scott Brown
    • yes no cross tick
      HMRC’s employment status test continues to frustrate UK contractors
      Sep 24, 2018  |  by Kobus Van den Bergh
    • Money
      Leaving the UK? Get some extra cash by claiming your tax refund
      Sep 20, 2018  |  by Kobus Van den Bergh
    • Businessman-on-graph
      How you can stop worrying and learn to love outsourced accounting
      Aug 03, 2018  |  by Scott Brown
    • tax-deadlines
      Self Assessment deadline reminder! Second payment due end of July
      Jul 25, 2018  |  by Kobus Van den Bergh
    • magnifying-glass-contract
      IR35: Are you in or are you out?
      Jul 02, 2018  |  by Kobus Van den Bergh
     
     

    South Africa

    Cape Town

    Regent Square
    Doncaster Road
    Kenilworth 7708 +27 (0) 21 657 2120

    Durban

    25 Richefond Circle
    Ridgeside
    Umhlanga 4320 +27 (0) 31 536 8843

    United Kingdom

    London

    Castlewood House
    77/91 New Oxford Street
    WC1A 1DG +44 (0) 20 7759 7514

    Croydon

    5-7 Selsdon Road
    South Croydon
    CR2 6PU +44 (0) 20 7759 7581

    Australia

    Melbourne

    9 Yarra Street
    South Yarra
    VIC 3141 +613 (0) 8651 4500

    Sable International is a trading name of 1st Contact Money Limited (company number 07070528), registered in England and Wales. We are authorised and regulated by the Financial Conduct Authority in the UK (FCA no. 517570), the Financial Services Conduct Authority in South Africa (1st Contact Money [PTY] Ltd - FSP no. 41900) and hold an Australian Financial Services License issued by ASIC to deal in foreign exchange (1st Contact Group - AFS License number 335 126).

    We use cookies to provide the best website experience for you. Using this website means that you agree to this. How we use cookies.