Contractor Tax – A Guide To Your Options

‘Contractor Tax’ is actually a simplistic expression used to describe exactly how contractors account and pay their taxes and National Insurance. There are many companies that use contractors with reg…

‘Contractor Tax’ is actually a simplistic expression used to describe exactly how contractors account and pay their taxes and National Insurance. There are many companies that use contractors with regard to specific duties or to help with special projects. The ramifications for Contractor Tax are wide ranging and need to be considered cautiously. The main options for contractors are:-

Self Employed

A self employed contractor will pay ‘Contractor Tax’ in much the same way as a normal self-employed person, for instance a plumber. A record of the costs incurred, materials etc must be maintained as well as summarised on the annual tax return. The self employed person has to raise their very own invoices as well as send these to customers.

Furthermore the self employed person will have to sign up for VAT in case your turnover is much more than $73,000 (2011/12). VAT is accounted for as well as paid to HMRC every 3 months, it is due even if the bill has not been paid at the time the VAT return is posted.

 

The main pitfall with this choice is that many companies will only employ a specialist contractor working for a limited organization. HMRC uses tests to establish that the contractor is truly self-employed and not a disguised employee of the client company which has serious implications on the level of Contractor Taxes paid.

Setting Up Your Very Own Company

A business can be started fairly simply by purchasing one ‘off the shelf’. The company will require its own bank account. Once again if the turnover surpasses $73,000 (2011/12) you have the additional problem of accumulating and paying over VAT.

While this option may allow the contractor much more freedom to operate their business the way they would like, the additional obligations make it necessary for more detailed records to be kept and may involve additional expenses. However the quantity of Contractor Tax paid can be reduced through the use of dividends instead of paying a high salary.

The main consideration for contractors is actually passing the tests to exhibit that the person running the company is an independent contractor and not considered a disguised employee of the client business. The failure of these tests could incur additional costs and potentially big penalties around the additional Contractor Tax due. When there is a dispute with HMRC the costs of defending the actual independent contractor status can be high and cannot be reclaimed.

Umbrella Organization

There is a rise in the use of Umbrella businesses when loopholes utilized by Contractors to lower their Contractor Tax were decreased by HMRC.

The way it works is that a service provider becomes an employee of an Umbrella company. Every week or month the contractor completes a time sheet and details their own allowable costs. The Umbrella Company invoices the client company. When the invoice is paid, the actual Umbrella Company will subtract the contractor’s taxes and National Insurance just before payment is made to the contractor’s banking account. This simplifies the entire process and helps to ensure that the right degree of Contractor Tax is paid out.

The extra benefit is the fact that working through an Umbrella Company ensures that there will not be a test to ensure that the contractor is not a disguised employee.

153 thoughts on “Contractor Tax – A Guide To Your Options”

  1. Hey there! I understand this is somewhat off-topic however I needed to ask.
    Does running a well-established blog like yours require a lot of work?
    I am brand new to writing a blog however I do write in my journal daily.
    I’d like to start a blog so I will be able to share my own experience and views online.
    Please let me know if you have any recommendations or tips for new aspiring blog owners.
    Thankyou!

  2. I blog quite often and I seriously thank you for
    your content. This article has truly peaked my interest. I am going
    to bookmark your site and keep checking for new information about
    once per week. I subscribed to your Feed as well.

  3. That is a really good tip particularly to those new to the blogosphere.
    Simple but very accurate info… Many thanks for sharing
    this one. A must read post!

  4. It’s appropriate time to make some plans for
    the future and it is time to be happy. I’ve read this post and if
    I could I desire to suggest you some interesting things or advice.

    Maybe you can write next articles referring to this article.
    I want to read even more things about it!

  5. Hi to every one, since I am really keen of reading this weblog’s
    post to be updated on a regular basis. It consists of
    nice information.

  6. I’m now not certain where you’re getting your information, however
    great topic. I needs to spend a while studying much more
    or understanding more. Thank you for excellent information I used to be searching for this information for my
    mission.

  7. Wow, fantastic weblog format! How long have you ever been running a
    blog for? you make running a blog glance easy. The full look of your web site is magnificent, as smartly as the content material!

  8. Whats up very nice site!! Man .. Beautiful .. Wonderful ..

    I’ll bookmark your site and take the feeds also? I am glad to find so many useful information right here within the
    submit, we need work out extra strategies in this regard, thanks for sharing.
    . . . . .

  9. Nice post. I learn something totally new and challenging on sites I stumbleupon every day.
    It will always be interesting to read content from other authors and use a little
    something from their websites.

  10. You could definitely see your enthusiasm within the article you write.
    The arena hopes for more passionate writers like you who are not afraid
    to say how they believe. Always follow your heart.

  11. Hi there, all the time i used to check web site posts here in the early
    hours in the dawn, since i like to gain knowledge of more and
    more.

  12. After I originally commented I appear to have clicked the -Notify me when new
    comments are added- checkbox and now whenever
    a comment is added I receive 4 emails with the same comment.
    Perhaps there is a way you are able to remove me from that service?
    Cheers!

  13. I really like your blog.. very nice colors & theme.
    Did you create this website yourself or did you hire someone to do it for you?
    Plz answer back as I’m looking to construct my own blog and would
    like to know where u got this from. thank you

  14. When I originally left a comment I seem to have
    clicked on the -Notify me when new comments are added- checkbox and now whenever a comment is added I receive four emails with the same comment.
    Perhaps there is a way you are able to remove me from
    that service? Cheers!

  15. Pretty section of content. I just stumbled upon your web site and in accession capital to assert that
    I get in fact enjoyed account your blog posts.
    Any way I will be subscribing to your augment and even I
    achievement you access consistently fast.

  16. Hi! Do you know if they make any plugins to protect
    against hackers? I’m kinda paranoid about losing everything I’ve worked
    hard on. Any tips?

  17. Great blog here! Additionally your web site
    so much up very fast! What web host are you the use of?
    Can I am getting your associate hyperlink for your host?
    I wish my web site loaded up as quickly as yours lol

  18. You are so cool! I do not believe I’ve truly read through something like this before.
    So great to find somebody with genuine thoughts on this subject.
    Seriously.. thanks for starting this up. This web
    site is something that is needed on the internet, someone with a bit of originality!

  19. Please let me know if you’re looking for a article writer for your blog.
    You have some really good articles and I believe I would be
    a good asset. If you ever want to take some of the load off, I’d absolutely love to write some content for your
    blog in exchange for a link back to mine.
    Please blast me an e-mail if interested. Many thanks!

  20. hello there and thank you for your info – I’ve certainly picked up something new from right here.
    I did however expertise several technical issues using this site, since I experienced to
    reload the web site a lot of times previous to I
    could get it to load properly. I had been wondering if your hosting
    is OK? Not that I am complaining, but sluggish loading instances times
    will very frequently affect your placement in google and can damage your high-quality score
    if ads and marketing with Adwords. Well I’m adding this RSS to
    my email and can look out for a lot more of your respective fascinating content.
    Make sure you update this again soon.

  21. Very great post. I just stumbled upon your weblog and wanted to
    mention that I have truly loved surfing around your weblog posts.
    After all I will be subscribing on your feed and I’m hoping you
    write once more soon!

  22. It’s appropriate time to make some plans for the long run and it is
    time to be happy. I have read this submit and if I may I desire to counsel you
    some fascinating things or suggestions. Maybe you can write subsequent articles
    regarding this article. I want to read more issues approximately it!

  23. I would like to thank you for the efforts you’ve put in writing this site.
    I really hope to check out the same high-grade blog posts by you later on as
    well. In fact, your creative writing abilities has
    encouraged me to get my own, personal website now 😉

  24. Hey there just wanted to give you a quick heads up. The text in your article seem to
    be running off the screen in Internet explorer. I’m not sure
    if this is a formatting issue or something to do with internet browser compatibility but
    I thought I’d post to let you know. The layout look great though!
    Hope you get the problem resolved soon. Kudos

  25. I’m really inspired along with your writing abilities as neatly
    as with the structure to your blog. Is this a paid subject or did you modify it
    your self? Either way keep up the nice quality writing, it
    is rare to see a nice weblog like this one these days..

  26. Hello i am kavin, its my first time to commenting anywhere, when i read this
    post i thought i could also create comment due to this sensible article.

  27. Wow, superb blog layout! How lengthy have you been blogging for?
    you make blogging glance easy. The overall glance of your website is wonderful, let
    alone the content!

  28. Unquestionably consider that which you stated.
    Your favourite justification seemed to be at the net the easiest thing to be aware
    of. I say to you, I certainly get annoyed at the same time as other people consider worries that they plainly don’t recognize about.
    You managed to hit the nail upon the top and outlined
    out the whole thing with no need side-effects ,
    other people could take a signal. Will likely
    be again to get more. Thanks

  29. I’m not that much of a online reader to be
    honest but your sites really nice, keep it up!
    I’ll go ahead and bookmark your site to come back down the
    road. All the best

  30. Your style is very unique in comparison to other folks
    I’ve read stuff from. I appreciate you for posting
    when you have the opportunity, Guess I will just book mark this site.

  31. I want to to thank you for this good read!! I certainly
    loved every bit of it. I have you saved as a favorite
    to look at new stuff you post…

  32. Great article! This is the type of info that should be shared across the internet.

    Disgrace on Google for now not positioning this put up upper!
    Come on over and discuss with my site . Thanks =)

  33. Good day! This is my first visit to your blog! We are a team of volunteers and starting
    a new project in a community in the same niche.
    Your blog provided us beneficial information to work on. You
    have done a outstanding job!

  34. Wonderful blog! I found it while searching on Yahoo News.
    Do you have any tips on how to get listed in Yahoo News?
    I’ve been trying for a while but I never seem to get there!
    Thank you

  35. Someone necessarily assist to make seriously posts I would state.

    This is the first time I frequented your web page and so far?

    I amazed with the research you made to create this actual put up incredible.
    Wonderful process!

  36. You can definitely see your skills in the article you write.

    The sector hopes for more passionate writers like you who are not afraid to mention how they believe.

    All the time follow your heart.

  37. Have you ever considered writing an ebook or guest authoring on other websites?
    I have a blog based upon on the same subjects you discuss and would really
    like to have you share some stories/information. I know my visitors would value your work.

    If you’re even remotely interested, feel free to send me an email.

  38. I do consider all the ideas you have introduced to your
    post. They are really convincing and can certainly work.
    Still, the posts are very short for novices.
    Could you please lengthen them a little from next time? Thanks for the
    post.

  39. Heya i am for the first time here. I found this board and I find It truly useful
    & it helped me out a lot. I hope to give something back and aid others like you aided me.

  40. Simply desire to say your article is as surprising.
    The clarity in your post is simply excellent and i can assume you are an expert
    on this subject. Fine with your permission let me to grab your RSS feed to keep updated
    with forthcoming post. Thanks a million and please carry on the gratifying work.

  41. Everything is very open with a precise clarification of the challenges.
    It was truly informative. Your website is very helpful.
    Thank you for sharing!

  42. I do accept as true with all the ideas you have introduced on your post.
    They’re very convincing and will definitely work. Still, the posts are too brief for
    novices. May you please lengthen them a bit from next time?
    Thanks for the post.

  43. you are in reality a good webmaster. The site loading
    velocity is amazing. It seems that you are doing any distinctive trick.
    In addition, The contents are masterpiece. you’ve performed a magnificent
    process on this matter!

  44. Hi, Neat post. There is an issue with your site in web explorer, would check
    this? IE nonetheless is the marketplace leader and a large part of
    other people will omit your wonderful writing due to this
    problem.

  45. My spouse and I absolutely love your blog and find the majority of your
    post’s to be just what I’m looking for. can you offer guest writers to write content available for you?
    I wouldn’t mind writing a post or elaborating on many of the subjects you write concerning here.
    Again, awesome web log!

  46. Admiring the dedication you put into your site and detailed information you provide.
    It’s awesome to come across a blog every once in a while
    that isn’t the same out of date rehashed material.
    Fantastic read! I’ve saved your site and I’m including your RSS
    feeds to my Google account.

  47. Very good website you have here but I was curious if you knew of any forums that cover the same topics discussed here?
    I’d really like to be a part of group where I
    can get suggestions from other knowledgeable individuals that share the same interest.
    If you have any suggestions, please let me know. Thanks a lot!

  48. Please let me know if you’re looking for a writer for your blog.
    You have some really good articles and I think I would be a good
    asset. If you ever want to take some of the load off, I’d
    really like to write some content for your blog in exchange for a link back
    to mine. Please send me an e-mail if interested. Regards!

  49. Excellent post. I was checking constantly this blog and I’m
    impressed! Extremely useful information specifically the last part 🙂 I care for such info a lot.
    I was looking for this particular info for a long time.
    Thank you and good luck.

  50. An impressive share! I have just forwarded this onto a friend who had been doing a little homework on this.
    And he actually ordered me lunch simply because I stumbled upon it for him…
    lol. So let me reword this…. Thank YOU for the meal!!
    But yeah, thanx for spending the time to talk about this
    subject here on your website.

  51. Simply want to say your article is as amazing. The clarity in your post is just spectacular and
    i can assume you’re an expert on this subject. Well with your permission allow
    me to grab your RSS feed to keep up to date with forthcoming post.

    Thanks a million and please carry on the rewarding work.

  52. Good post. I learn something new and challenging on websites I stumbleupon every day.

    It’s always exciting to read through content from other writers and practice a little something from other sites.

  53. Oh my goodness! Amazing article dude! Thank you, However I
    am experiencing issues with your RSS. I don’t know why I am unable to
    subscribe to it. Is there anybody else getting
    identical RSS problems? Anybody who knows the solution will you
    kindly respond? Thanks!!

  54. I think this is among the most vital info for me.
    And i’m glad reading your article. But want to remark on some general things, The site style is perfect,
    the articles is really great : D. Good job, cheers

  55. I just could not go away your web site prior to suggesting that I extremely loved the usual info
    a person provide on your guests? Is going to be back frequently to inspect new posts

  56. Hello there, You’ve done an incredible job. I’ll certainly digg it and personally suggest to my friends.
    I’m confident they’ll be benefited from this web site.

  57. Thanks on your marvelous posting! I definitely enjoyed reading it, you are a great author.

    I will be sure to bookmark your blog and definitely will come
    back someday. I want to encourage you to continue your great writing,
    have a nice holiday weekend!

  58. Hi there just wanted to give you a quick heads up. The text in your post
    seem to be running off the screen in Internet explorer.
    I’m not sure if this is a formatting issue or something to do with browser compatibility but I thought I’d post
    to let you know. The layout look great though! Hope you
    get the problem resolved soon. Many thanks

  59. This design is wicked! You obviously know how to keep a reader amused. Between your wit and your videos, I was almost moved to start my own blog (well, almost…HaHa!) Fantastic job. I really enjoyed what you had to say, and more than that, how you presented it. Too cool!|

  60. What’s Happening i am new to this, I stumbled upon this I have discovered It positively helpful and it has helped me out loads. I hope to contribute & aid other customers like its helped me. Good job.|

  61. I am extremely impressed with your writing skills and also with the layout on your blog. Is this a paid theme or did you customize it yourself? Either way keep up the excellent quality writing, it is rare to see a nice blog like this one today.|

  62. Wonderful article! This is the type of information that should be shared across the internet. Disgrace on the seek engines for no longer positioning this submit upper! Come on over and visit my web site . Thanks =)|

  63. Hello there, just became aware of your blog through Google, and found that it is really informative. I’m going to watch out for brussels. I’ll appreciate if you continue this in future. Numerous people will be benefited from your writing. Cheers!|

  64. I really like your blog.. very nice colors & theme. Did you create this website yourself or did you hire someone to do it for you? Plz answer back as I’m looking to design my own blog and would like to find out where u got this from. kudos|

  65. Do you have a spam issue on this site; I also am a blogger, and I was wondering your situation; we have created some nice practices and we are looking to exchange solutions with others, please shoot me an e-mail if interested.|

  66. I know this if off topic but I’m looking into starting my own weblog and was curious what all is needed to get setup?
    I’m assuming having a blog like yours would cost a
    pretty penny? I’m not very internet smart so I’m not 100% positive.

    Any recommendations or advice would be greatly appreciated.
    Thanks

  67. Does your blog have a contact page? I’m having problems locating it
    but, I’d like to send you an email. I’ve got some
    creative ideas for your blog you might be interested
    in hearing. Either way, great site and I look forward
    to seeing it develop over time.

  68. Have you ever considered about adding a little bit more than just your articles?
    I mean, what you say is fundamental and everything.

    But think about if you added some great pictures or videos to
    give your posts more, “pop”! Your content is excellent but with pics and videos, this website could definitely be one of the most beneficial
    in its field. Very good blog!

  69. Definitely imagine that that you stated. Your
    favorite justification seemed to be on the internet the simplest thing to bear
    in mind of. I say to you, I certainly get annoyed whilst other people think
    about issues that they plainly do not understand about.
    You managed to hit the nail upon the top and also defined out the entire thing with no need side-effects , other people could take a
    signal. Will probably be again to get more. Thanks

  70. We absolutely love your blog and find the majority of your post’s
    to be just what I’m looking for. can you offer guest writers to write content in your case?
    I wouldn’t mind creating a post or elaborating on most
    of the subjects you write about here. Again, awesome web
    log!

  71. I blog quite often and I really appreciate your content.
    This great article has truly peaked my interest.
    I will bookmark your site and keep checking for new information about
    once per week. I opted in for your RSS feed as well.

Leave a Reply

Your email address will not be published. Required fields are marked *